Peru in focus as possible impeachment looms; Colombia benchmark improves after downgrade

By Rebecca Melvin

New York, Dec. 19 – The spread on Peru’s 2027 bonds was little changed on Tuesday at about 60 basis points over U.S. Treasuries as market players eyed the possibility of President Pedro Pablo Kuczynski being impeached this week after documents surfaced showing he had business ties with Brazilian industrial group Odebrecht SA more than a decade ago while he was a government official.

“It looks like the president of Peru isn’t going to stick around,” a New York-based market source said.

Peru’s 2027 bond is among the most liquid of a generally illiquid sovereign dollar curve. The current spread level is toward the lower end of its recent range, including a swing down to 56 bps over Treasuries at the end of November and subsequent rebound to up about 70 bps, the market source said.

Colombia’s 3 7/8% notes due 2027 remained higher on Tuesday a week after ratings agency S&P Global Ratings lowered Colombia’s long-term foreign currency sovereign credit rating by a notch to BBB-, citing the South American country’s weakened policy flexibility.

The Colombia 2027 notes, which are probably the most liquid of the sovereign curve, were seen at 102 bid, 102¼ offered, representing a ¾ point improvement over the last week since the downgrade news, a New York-based market source said.

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