Colombia: Sovereign downgraded on revised methodology

By Zach Fuchs

Local-currency sovereign issues generally give a boost to creditworthiness because they reduce a country’s exposure to FX movements. But even though Colombia has been aggressive in reducing its hard-currency bonds as a proportion of government debt – from 50% to 30% in two years – it is now just one notch away from slipping out of investment-grade territory in its local currency rating.

Moody’s Investors Service pushed Colombia’s domestic currency bond rating down to Baa3 from Baa2 at the end of June, although the country’s other ratings held firm.