The Price of Costa Rica's Foreign Debt goes Up

In the past 7 months, the price of bonds expiring in 2020 went from 105 to 120, while their yield dropped from 9.20% to 6.3%.

Tuesday, August 4, 2009

Francisco de Paula Gutiérrez, Central Bank President, justified this recovery as a result of economic improvement in the country.

Said recovery is also expressed in the spread, a variable that measures the difference in yield with U.S. bonds, considered the world's safest. In theory, the lower the spread, higher is the confidence of investors in the country's economy. This spread dropped 116 percentage points in the last 7 months.

A lower spread is a phenomena affecting other countries in the region: "the spread for Salvadoran bonds expiring in 2023 dropped 302 basis points, and for Guatemalan bonds expiring in 2034, it dropped 147", reported newspaper Nacion.com.

More on this topic

Costa Rica: Sovereign Debt Loses Value

December 2015

The rise of interest rates in US is one of the reasons behind the lower demand for Costa Rican debt bonds, which are perceived as riskier because they are not investment grade.

When US interest rates began to fall, international investors sought riskier options and performances, such as external debt bonds rated below investment grade in countries such as Costa Rica.

Perception of Debt Risk Increases in Costa Rica

December 2014

The difference in the yield on 30-year bonds relative to US Treasuries of the same period went from 3.33% in April to 3.85% up to December 4th.

The decision by the Executive to increase public spending in 2015 and continue to increase the fiscal deficit in an international environment which is a less favorable than it was in previous years is one of the reasons that explains the higher risk now being perceived by international investors regarding Costa Rican foreign debt bonds.

Credit at Risk in Costa Rica

July 2012

The Legislative's delay in approving international financing could contract credit and increase upward pressure on interest rates.

A bill to authorize financing for the country in international markets through Eurobonds has become stalled in the Legislative Assembly, amid a clash between government and opposition.

Panama Sells $1 Billion Bonds

November 2009

The Government raised $1 billion through a 10-year bond offer, after an improvement in its sovereign debt ratings.

The new rating pushed the country to the verge of investment grade. Credit Suisse Group AG and Deutsche Bank AG were the underwriters.

"The securities were priced at 99.796%, with a yield of 5.224%, maturing in January 2020", reported Prensa.com.

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