March 18, 2020 / 12:08 AM / 22 days ago

UPDATE 2-Colombia to cut bond issuance by $366 million as banks announce relief measures

(Adds detail from Grupo Aval)

BOGOTA, March 17 (Reuters) - Colombia said on Tuesday it will reduce its TES bond auction tranche for this year by 1.5 trillion pesos ($365.8 million) to ease borrowing costs and as banks prepared to take financial pressure off clients amid market volatility created by the coronavirus.

The finance ministry said in a statement it will now auction 23 trillion pesos of TES, or treasury, paper in 2020. It has already issued some 6.3 trillion pesos.

The measures also include a suspension in sales of short-term TES and long-term peso-denominated TES during March.

“They are measures to facilitate and support the correct functioning of the Colombian public debt markets ... to maintain liquidity in the system, reduce the pressure that exists on interest rates given the environment of national and international volatility,” public credit director Cesar Arias said.

The Andean country has 65 confirmed cases of COVID-19, which has infected over 187,000 people and killed nearly 7,500 worldwide.

Coronavirus has roiled global markets and sent Colombia’s peso to record lows against the dollar. State-run oil company Ecopetrol has cut its planned investment for 2020 by $1.2 billion amid the outbreak and the increase in global crude supply.

Banks in the country were beginning to adopt measures to alleviate pressure on clients, including grace periods and payment extensions for debts and the possibility of getting advances for longer periods.

Bancolombia, the country’s largest financial entity, announced a special 600 billion peso ($146.3 million) line of credit for small- and medium-sized businesses and other parts of the corporate sector.

“The problems associated with the impact of COVID-19 and the economic conditions derived from the pandemic impact people’s activities and the dynamic of various sectors of the economy,” Bancolombia said in a statement.

Financial conglomerate Grupo Aval, whose subsidiaries include several major banks, has offered clients a two months grace period, with scope for a further two-month extension, during which they will not need to loan repayments. Clients will also see interest rates lowered for purchases in pharmacies, supermarkets, clinics and hospitals.

The country’s banking guild will meet with finance ministry representatives to look into joint measures, a source at the guild said.

Colombian banks extended 501.7 trillion pesos ($122.36 billion) in credit last year.

The central bank board last week announced measures aimed at providing liquidity to the market, including an auction of non-deliverable forwards worth up to $1 billion to aid trading in the U.S. currency.

$1 = 4,099.93 Colombian pesos Reporting by Nelson Bocanegra, additional reporting and writing by Julia Symmes Cobb and Oliver Griffin; Editing by Steve Orlofsky and Richard Chang

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