New Colombia Finance Minister Seeks To Calm Market As Bonds, Peso Suffer

New Colombia Finance Minister Seeks To Calm Market As Bonds, Peso Suffer

The logo of the Colombian Stock Exchange is displayed inside a building in Bogotá. © Thomson Reuters The logo of the Colombia Stock Exchange is displayed inside a building in Bogotá.

LONDON/BOGOTA (Reuters) – Colombia's new Finance Minister Ricardo Bonilla and President Gustavo Petro tried to calm markets on Thursday as pesos, bonds and stocks plunged after Bonilla's predecessor was abruptly fired.

On Wednesday, Pietro appointed Ricardo Bonilla to the post in a cabinet reshuffle, replacing José Antonio Ocampo.

The currency closed 2.87% lower against the dollar on Thursday at 4,656, a one-month low.

MSCI COLCAP shares fell 1.53% to 1,167.51, while the yield on local TES bonds due February 2033 rose to 12.019% from 11.425% Wednesday.

The premium required for investors to hold the country's international bonds rose 20 basis points to 429 basis points, the biggest daily increase in six months, according to JPMorgan data.

"Of course, we will maintain fiscal order," Bonilla told Radio Caracol, referring to a 2011 measure that imposed political restrictions to stem a slide in public finances.

He added that the budget and current account deficit must continue to be reduced so that the country has greater financial autonomy.

Bonilla runs a budget surplus and raises Bogota's risk outlook when he becomes the city's finance minister and Petro as mayor, Petro wrote, adding that the central bank would remain independent.

Ocampo, who will be in office until May 1, will represent the government at a board meeting on Friday, where market participants will be divided over whether politicians will keep interest rates on hold or raise them.

Bonilla said he expected a suspension.

Even if the market wants Ocampo to stay, Petro's coalition in Congress, torn apart by health reforms, could undermine the president's reformist wing.

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"The loss of Finance Minister Ocampo, who was seen as the anchor of economic stability… is bad news," said Barclays' Alejandro Areasa. "But it also relieves the last breath of sweeping reform."

"The recent market moves have been exaggerated," Wells Fargo said in a statement, adding that Bonilla "is also a technocrat with a track record of prudent fiscal policy" and did not adjust his weighted estimate.

The risk premium that weighed heavily on Colombian assets in the last three months of 2022 has declined recently, said JPMorgan chief Diego Pereira, although the flawed adjustments make asset prices particularly vulnerable to sudden changes in risk.

"Uncertainty regarding future fiscal policy and fiscal rules is likely to challenge markets again," said Pereira.

(Reporting by Nelson Bocanegra in Bogota and Karin Strohecker in London; Additional reporting by Rodrigo Campos in New York; Writing by Karin Strohecker and Julia Sims Cobb; Editing by Mark Porter, Jonathan Oatis, Alexandra Hudson and Daniel Wallis)

Sunday |: Bloomberg Watch 24/10/2022

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