Fixed Income Forum

Few events have more impact on Investor’s risk perception than presidential elections. This hypothesis was once again tested with the successful completion of the runoff elections in Colombia, celebrated this past Sunday, June 19, 2022. The result was a victory for Gustavo Petro, seen by political analysts as an anti-establishment politician with a progressive agenda.

During the final days of the campaign, it became increasingly clear to many investors and analysts that Gustavo Petro would win the election. This led to doubts over the economic future of the country and a subsequent outflow of capital from investors just prior and continued after the official announcement. This has in turn weakened the Colombian currency (COP) which has depreciated 5% in the aftermath of the elections.

Spreads for the 5yr Colombian CDS have increased by 35% month-to-date. While the iShares MSCI Colombia ETF ($ICOL) has lost 25% of its value during the same time and is heading for the worst monthly performance for this ETF in over 2 years.

Data provided by Solve Advisors Inc

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