Analysis of U.S. and Costa Rican Bonds

©image: Aldesa

Two factors are contributing to low prices in short term securities and higher prices for long term ones in the United States: low reference rates and high fiscal deficit.

Additionally, the yield difference between U.S. and emerging bonds market is at its lowest since the start of the of the financial crisis (2.72% now versus 8.91%).

Aldesa considers that this situation gives Costa Rican long term securities little margin to move up, with considerable risk of a drop in their price.

More on this topic

Barclays Recommends Buying Costa Rican Short-Term Debt

May 2010

Barclays Capital sees a strong new economic team, growing FDI, dynamic and diversified exports, in addition to responsible anti-cyclical fiscal and monetary policies.

COSTA RICA
A proven track record.

Laura Chinchilla, the first woman president of Costa Rica, is expected to continue many of the policies of Oscar Arias, but with her own nuances.

Price of Costa Rican Bonds on the Rise

September 2009

News of upcoming economic recovery is pushing up the price of Costa Rica's external debt bonds.

An article in Prensalibrecr.com reports that "Costa Rica's sovereign debt bonds (bde) are not immune to the price increase of other emerging market bonds. As a result, the bde 2020 was traded as high as 127.91 this week, reaching levels similar to those before the bankruptcy of Lehman Brothers".

The Price of Costa Rica's Foreign Debt goes Up

August 2009

In the past 7 months, the price of bonds expiring in 2020 went from 105 to 120, while their yield dropped from 9.20% to 6.3%.

Francisco de Paula Gutiérrez, Central Bank President, justified this recovery as a result of economic improvement in the country.

Said recovery is also expressed in the spread, a variable that measures the difference in yield with U.S.

Panama raises US$235 million in bond reopening

June 2008

Panama raised US$235 million by reopening a 2015 bond. The price was 109.564% of face value, equivalent to a 5.533 percent yield and 158 base points over US Treasuries.

The price was the best Panama has ever achieved in international debt markets. US$1.148 billion of the 2015 bond remains outstanding.