Colombia navigates fiscal challenges following S&P rating revision.

In Colombia’s local fixed-income market, the Títulos de Tesorería (TES) fixed-rate curve appreciated across its entire structure over the last month. As of March, the total balance of TES in circulation stood at 747.9 trillion COP. Despite this positive market valuation, macroeconomic headwinds remain a central concern for the Ministerio de Hacienda y Crédito Público. The fiscal balance of the Gobierno Nacional Central (GNC) reported an accumulated deficit of 1.7% of GDP through February.

These persistent fiscal imbalances were cited as the primary driver behind the recent decision by S&P Global (NYSE: SPGI) to downgrade Colombia’s sovereign credit rating. The administration continues to manage these debt instruments against a backdrop of tight monetary conditions, which remain a primary focus for institutional investors holding Colombian sovereign paper.

Colombian fixed-income markets show valuation gains despite a recent S&P credit downgrade linked to ongoing fiscal imbalances.

The international fixed-income landscape experienced notable shifts between March 25 and April 23, 2026. The yield curve for US Treasury bonds displayed mixed performance, defined by a decrease in short-term rates and an increase in long-term yields. Analysts attribute this volatility primarily to conflicting signals regarding the ongoing conflict in the Middle East.

Economic indicators released by the Bureau of Labor Statistics show that annual consumer inflation, measured by the Consumer Price Index (CPI), accelerated by 0.9 percentage points to reach 3.3% in March. This data triggered a rebound in short-term inflation expectations within the Treasury bond market, while medium and long-term outlooks remained stable. Consequently, the Intercontinental Exchange (NYSE: ICE) MOVE index—which tracks public debt market volatility—and the Cboe (NYSE: CBOE) VIX—which monitors S&P 500 equity volatility—both registered significant declines during the period.

Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) has entered into a formal payment agreement with the Government of Colombia to settle outstanding balances from the Fuel Price Stabilization Fund, known in Spanish as the Fondo de Estabilización de Precios de los Combustibles (FEPC). The agreement, reached through the Ministerio de Hacienda y Crédito Público and the Ministerio de Minas y Energía, addresses $1.6 trillion COP owed for the first quarter of 2025.

Under the terms of Resolutions 00368 and 00369 issued by the Dirección de Hidrocarburos, the total amount is divided between Ecopetrol S.A., which is owed $1.2 trillion COP, and Refinería de Cartagena S.A.S. (Reficar), which is owed $0.4 trillion COP. The repayment schedule began with a cash transfer of $2.89 billion COP on April 1, 2026. The remaining balance of approximately $1.55 trillion COP is scheduled to be paid on December 15, 2026, through the issuance of Treasury Securities, or Títulos de Tesorería (TES). The Colombian state has acknowledged the financial costs associated with the time elapsed until the final December payment.

“The Ecopetrol Group continues to work in close coordination with the Ministries of Finance and Public Credit and of Mines and Energy — the authorities responsible for fuel pricing policy — in the implementation of payment mechanisms and the reduction of FEPC balances.” — Ecopetrol S.A.

Concurrent with the subsidy settlement, Ecopetrol received authorization from the Ministerio de Hacienda y Crédito Público via Resolution 0666 to execute an external public debt management transaction totaling $1.25 billion USD. The five-year loan was secured through a consortium of international lenders including BBVA (BME: BBVA; NYSE: BBVA), Bank of America (NYSE: BAC), JP Morgan Chase (NYSE: JPM), and Bank of China (HKG: 3988). The credit facility carries a floating interest rate indexed to the Secured Overnight Financing Rate (SOFR) and will be repaid in four equal installments.

The proceeds from the $1.25 billion USD loan are designated for the repayment of existing obligations. Specifically, $1.2 billion USD will be used to settle a 2024 loan previously authorized for the acquisition of the state’s interest in Interconexión Eléctrica S.A. E.S.P. (ISA), while the remaining $50 million USD will be applied to an outstanding balance from a 2025 credit agreement. The loan agreement is governed by the laws of the State of New York and includes standard covenants regarding the borrower’s payment capacity and financial integrity.

These financial maneuvers are intended to optimize the maturity profile of the Ecopetrol Group, which remains responsible for over 60% of hydrocarbon production in Colombia. The company continues to operate integrated systems in transportation, refining, and petrochemicals, with additional international operations in the US Permian basin, the Gulf of Mexico, Brazil, and Mexico.