Andean Crisis Deepens, Bond Slide Slows

Andean bonds continued to underperform Tuesday as the diplomatic crisis between Colombia, Venezuela and Ecuador deepened, though the decline in prices has slowed. The Vene 2027 closed at 97.13, down from 97.52 Monday, according to MarketAxess, while the 2014 finished at 96.00, down from 96.83. The 2027 lost two points in the previous session. Colombia 37 dropped a point to 105.30 Tuesday, while Ecuador 30s traded at 96.82, versus 97.29 in the previous session. It is unclear how the storm will impact the markets in the long run. “If there is a disruption in trade for a day or for a week it is not very relevant,” says Carola Sandy, analyst at Credit Suisse. “The risk comes from a long lasting disruption of trade. I don’t think that this is likely because it is not in the best interest of any of the two countries,” she adds. Ecuador has been clearer in its role, as president Correa has formally severed diplomatic ties with Colombia, but made specific remarks about not cutting economic links, Sandy adds. “Chavez has assumed bellicosity in a situation in which Venezuela has nothing to win,” says Francisco Gonzalez Cruz, rector of Venezuela’s Universidad Valle del Momboy.