Article / 04 July 2014 at 13:00 GMT

World Cup Bond Update: Latin America versus Europe

Fixed Income trader / Saxo Bank
Denmark
By Michael Boye

Latin American outsiders have enjoyed great success at the World Cup so far, challenging the established European players. We believe the same could be true for the global bond markets, as investors will have to look outside developed European markets for attractive yield premiums.

Perhaps the best performance so far has been put on by Colombia, which has impressed with its attacking display. Now they face their biggest test when hosts and firm favorite Brazil awaits. While still the underdog on the football pitch, Colombia has in recent years outpaced Brazil in the bond markets on the back of stronger economic growth which has been reflected in credit spreads. 

Colombia and Brazil

Investors seeking exposure to the Colombian economy will find good opportunities in Bancolombia, a full service bank with 68 billion USD in assets and Baa3 / BBB- senior ratings by Moody's and S&P, or Colombia Telecomunicaciones, the largest telecommunications company in Colombia and jointly owned by Telefonica and the Colombian government.

Another positive surprise, Costa Rica, will look to extend its adventure against the Netherlands. Costa Rica offers a few USD denominated bond investment opportunities for international investors, including Banco de Costa Rica, a full-service bank with Baa3 and BB+ ratings from Moody's and Fitch respectively.
Cartegena

The search for decent returns leads more and more investors to Columbia. Photo: iStock

-- Edited by Clare MacCarthy

Michael Boye is a fixed income trader at Saxo Bank

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