Fitch’s downgrade of Colombian hard currency bonds in July (which moved it into the HY bracket) did not appear to have any impact on foreigners’ holdings of Colombian TES. Indeed, in July foreigners increased their holdings of Colombian TES by COP1.17tn, reaching COP96.9tn. In percentage terms, foreign holdings of TES fell from 25.7% in June to 25.5% but this was due to the amount of TES outstanding increasing by COP7.2tn. The biggest buyers in July were the finance ministry with its primary focus on COLTES 22s, which outperformed the rest of the curve, followed by commercial banks. The TES curve performed relatively well with the front and belly of the curve outperforming the long end. In our view, the removal of the tax on foreign holdings of TES that is expected to be approved in the tax bill recently submitted to Congress could provide some support to the curve. The recent increase in inflation prints might push the central bank to increase its overnight lending rate; we expect a first hike in September (+25bp) and potentially two more before year-end. Foreign investors appear to be taking notice of this; while their ownership of index-linked bonds is only c.4.4% of their total holdings, they have been steadily adding positions in recent months.