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Manulife, Pimco load up on Colombian government peso bonds

Manulife, Pimco load up on Colombian government peso bonds
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Two of the world’s biggest asset managers loaded up on Colombian peso bonds in the last quarter as the government pledged to rein in deficits to defend the nation’s investment-grade credit rating.

Pacific Investment Management Co. and Manulife Financial Corp., two of the largest reported holders of the nation’s local debt, both added to their exposure since April, according to data compiled by Bloomberg. Pimco bought at least US$100 million of the securities over that period, while Manulife purchased at least US$45 million, according to data compiled by Bloomberg.

“We have pivoted to having a more positive outlook on Colombian local bonds following the improvement in the macro framework which has been outlined by the ministry of finance,” Pramol Dhawan, Pimco’s Newport Beach-based head of emerging markets, said in an email. “They have been showing a strong determination to work with ratings agencies to preserve their credit ratings.”

Pimco manages about US$1.8 trillion in assets, while Manulife manages about US$800 billion.

Colombia’s economy is growing faster than peers including Brazil, Mexico and Chile. President Ivan Duque’s government has pledged to cut spending and said it will keep the fiscal deficit comfortably below its limit of 2.7 per cent of gross domestic product this year. Fitch Ratings and Moody’s Investors Service both rate Colombia’s sovereign debt two steps above junk, while S&P Global Ratings rates it one notch above.

The yield on Colombia’s peso bonds maturing in 2028 fell to a six-year low of 5.71 per cent this month.

Colombia will probably need to do more to curb its deficit, but it’s reassuring that it shows the necessary commitment to achieving this, said Richard Segal, a London-based analyst at Manulife.

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