Since 2014, the Colombian local public bond market has experienced a substantial increase in the participation of foreign investors due to a reduction of the tax rates on foreign portfolio investment returns and the increased weight of Colombia in the JP Morgan GBI-GD. Some evidence suggests that the resulting inflows have reduced bond and loan interest rates and raised loan supply. There is also evidence of an increased sensitivity of local public bond yields to CDS and EMBI, although the influence of external financial conditions on domestic lending rates has remained subdued. Finally, no evidence is found of a shift in the transmission of domestic monetary policy shocks to public bond and lending interest rates after the increase in foreign participation in the local bond market
