What a TES is and how to buy one in Colombia

TES (títulos de tesorería, treasury securities) are bonds issued by Colombia’s national government, through the Ministry of Finance, to fund itself. When you buy a TES you lend money to the government: it pays you interest every year and returns the principal at maturity. They are the most traded security in the Colombian market and the benchmark for every other rate.

The two main types

• Peso TES (fixed rate). They pay a fixed coupon in pesos every year. Today the 10-year point of the TES curve is around 13.30%.
• UVR TES. Principal and interest are adjusted by the UVR, which rises with inflation. Their yield is “real”: what you earn above inflation.

You can see what they pay today at 1, 5 and 10 years in rates today.

How a TES works, with an example

A TES with a face value of COP 10,000,000, a 7% coupon and 5 years to maturity pays you COP 700,000 every year and COP 10,000,000 at the end. But you almost never buy it at face value: you buy it at a price that depends on that day’s market rate. If the market requires 12%, that 7% coupon TES trades below its face value, so that whoever buys it earns 12% a year if they hold it to maturity.

The risks you take

• Interest rate risk: if rates rise after you buy, the price of your TES falls. If you sell before maturity, you can lose money. If you hold it to the end, you receive what was agreed. We saw it in 2022, when the 10-year TES yield reached 15.43%.
• Issuer risk: in pesos, the government is the country’s lowest-risk issuer, although no issuer is risk-free.
• Liquidity: TES trade heavily, but an individual sells through an intermediary and pays costs.
• No Fogafín insurance: deposit insurance covers CDTs and accounts, not TES.

How an individual can buy TES

1. Through a stockbroker (sociedad comisionista de bolsa) or an authorized institution that offers TES to individuals: you open an account, you are assigned a risk profile and you buy in the secondary market.
2. Indirectly, through a collective investment fund that invests in TES. It is simpler and works with smaller amounts, but you pay a management fee and your return varies with the portfolio’s daily price.

Before buying, ask about costs (purchase and custody fees), the minimum amount and whether you are shown the clean or the dirty price. The dirty price includes the interest accrued since the last coupon. If you live outside Colombia, ask the intermediary about the rules that apply to foreign investors.