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Local Assets Come Under Significant Pressure Following Petro Win

COLOMBIA
  • Colombian assets tumbled Tuesday as markets reopened after leftist Gustavo Petro won Sunday’s presidential election. At the peso’s worst point, USDCOP rose as much as 5% to 4092, while stocks dipped 6% before paring some of those losses.
  • The nation’s sovereign dollar bonds were among the worst performers in emerging markets, and yields on local debt due 2024 lingered near a record high. State-run oil company Ecopetrol SA’s securities also took a hit, with shares down more than 10% and benchmark dollar bonds briefly touching an all-time low.
    • Colombian IBR swap rates soared with the long end of the curve rising roughly 40bps. This comes amid concern that Petro will transform the country’s business-friendly model. The former guerrilla has pledged to stop awarding new oil exploration contracts, do a complete overhaul of the nation’s pension system and increase tax on the rich and large landowners.
  • Following the sharp sell-off, markets will turn their attention to a potential announcement of the next finance minister – an action that may be used to calm market anxieties.
  • President-Elect Petro’s economics advisor Ricardo Bonilla spoke on Colombia's BLU radio yesterday indicating that Petro is likely to name a finance chief this week.
    • Ricardo Bonilla, who served as Bogota’s secretary of finance when Petro was mayor of the country’s capital, added that he is also in the running for the position.
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