Summary: Public trust funds, pension funds and international investors made up the bulk of COLTES buyers in January. Local banks accounted for all the net selling flows seen in January, where there was a notable increase in demand from counterparties despite the 2.6% net growth in market size during the month. The nominal TES market saw supply expand by c.COP15trn, which was absorbed by the aforementioned key players. Although Hacienda did not record significant flows relative to other key participants, its holdings did jump from just under COP0.2trn to COP0.9trn.
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Market view: Demand from key market participants improved significantly in January and was in line with the broad rally across the curve in nominal COLTES. This is despite US Treasuries ending January almost flat in yield terms across the curve vs the end of 2024. As noted in our previous COLTES holders report, where we shifted our relatively cautious stance on local yields to a more constructive one, we see scope for continued performance in the COLTES market as nominal yields have reached levels that provide significant risk premia, especially in longer-dated tenors that still trade above the 12.00% handle, which should provide scope for notable duration returns over the medium term. We also continue to see value in COLTES 2028s as a play for high carry and rolldown. January’s YoY core CPI showed continued signs of reversion from key components such as imputed rents. In addition, annualised CPI could see added support from negative base effects during 1H25, although, as we have seen recently, indexation pressures could add some noise to headline measures in 1Q25. As a result, BanRep may take a more dovish stance by the 2Q (after its upcoming board changes), although for now it remains cautious.
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International investors purchased a net c.COP2.3trn of COLTES in January 2025, a 2.2% m-o-m increase in allocation. Still, given COLTES supply growth of 2.6%, holdings fell marginally to 17.6%, from 17.7% in December 2024, and remain close to their lowest level since March 2016. Nominal TES accounted for most of the net monthly purchases as UVR linkers saw just COP0.2trn of net purchases.
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Public trust funds were the largest buyers of COLTES in January, picking up a whopping COP5.8trn or 39% of January’s net issuance, COP4.8trn in the Nominal TES market and COP 1.0trn in UVR, driving holdings above COP50trn (+13.1% m-o-m) or 8.4% of the COLTES market.
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Pension funds continued to buy a large amount of COLTES in January, with inflows of c.COP4.5trn (+2.6% m-o-m), similar to foreigners, which caused a slight decline in holdings to 32.2% from 32.4% in December 2024. Nominal COLTES accounted for 91% of pension net purchases.
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Local banks were the largest net sellers after two consecutive months of larger purchases. The outflow amounted to COP3.3trn (-3.5% m-o-m), dropping holdings from 15.9% to 15.0% of the market. All of the net sales from local banks came from Nominal COLTES (c.COP3.6 trn).