TES Sale Operation to the Ministry of Finance and Public Credit

In response to a request from the Ministry of Finance and Public Credit, on 2 October 2018, Banco de la República (the Central Bank of Colombia, hereinafter BR) sold part of its monetary portfolio to that entity, amounting $5,054.3 thousands of millions pesos. This operation allows the Government to improve the management of its funding and debt maturities in the short term, and does not imply an expansion or contraction of liquidity in the economy.

What is the value of the TES portfolio held by BR?

At the end of September, the balance of TES held by BR was $12,002 thousands of millions  (value at market prices). The BR's portfolio (expressed in nominal values) was composed of TES denominated in pesos ($10,621.9  thousands of millions) and TES denominated in UVR (2.6  thousands of millions).

What titles were negotiated in the operation?

As agreed with the Ministry, the Central Bank sold fixed rate TES denominated in pesos and UVR, with maturities in 2018 and 2019. The detail of the securities is presented below:

The total value of the operation at market prices was $5,054,277,599,137.73.

What was the price of the sales made by BR?

The operations were carried out at market prices, considering the internal rate of return calculated on the basis of the value prices provided by price vendors on the previous day (1 October). The securities were  priced on the day of the operation at that rate, taking into account one more day of interest accrual.

Why does the operation have a neutral monetary effect?

As per the memorandum of understanding signed by BR and the Ministry of Finance and Public Credit in 2005, the latter retains its excess liquidity in remunerated deposits at BR. Based on these resources, BR can make investments in TES that are part of its monetary assets. Considering that the resources for the purchase of securities come from the deposits of the Ministry at BR, an asset is reduced on the balance sheet of the latter (TES balance) while a liability is reduced (Treasury deposits) in the same amount. Thus, the operation does not affect the monetary base, for which it has neither an expansionary nor a contractionary effect in liquidity in the economy.

Are these operations related to the program of accumulation of reserves?

No. The sale operations were carried out by request of the Ministry to manage its funding and its debt maturities.

Are other additional operations being considered?

No. This request encompasses only the references and amounts mentioned above.