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Bond Market News
Colombia and Ecopetrol Downgraded to BB Amid Fiscal Concerns
June 30, 2025
Colombia was downgraded to BB from BB+ by S&P with a negative outlook. S&P has cited limited fiscal flexibility, high debt burden, steady fiscal deterioration and security challenges as the major reasons for this downgrade. The government’s recent decision to suspend its fiscal rule has worsened the predictability, says S&P. In recent years, non-interest government spending has increased, whereas revenues have failed to keep up despite the 2021-22 tax reforms. S&P expects deficits to average 6.2% of GDP over 2026-28, and net general government debt to rise to 64% in 2025-28, vs 58% in 2024. Exports remain volatile due to the country’s high reliance on hydrocarbons.
Colombia’s 3% 2030s are trading stable at 86.33, yielding 6.5%
In line with the sovereign rating action, Ecopetrol was also downgraded to BB from BB+, reflecting the broader sovereign risk. Colombia owns 88.49% of the petroleum company. Despite the rating downgrade, S&P expects Ecopetrol to maintain its consistency with leverage and profitability. Net Debt-to-EBITDA is expected to remain around 2.0-2.5x with EBITDA margins expected at about 40%. Ecopetrol’s 6.875% 2030s are down by 0.2 points to 99.08, yielding 7.1%.
Meanwhile, Canacol Energy, a Calgary-based gas producer which mainly has its operations in Colombia, has seen its bonds drop sharply in the last 30 days. Amid concerns of a recent debt repayment clause and gas prices falling by 15% this year, investors are reported to have been exiting its bond after collecting their May coupons. For instance, Canacol’s 5.75% 2028s have fallen by ~23% to 35.51 MTD.
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