31 May 2026

Technical relief, distrust intact

Colombia's market closed the week with a misleading image. On one side, the cancellation of the Swiss franc TRS gave the government a technical win that helped contain immediate debt noise. On the other, the core debate stayed in place: political risk, fiscal fragility, and confidence still too brittle to argue that the peso is safe.

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Analysis

Four signals that make it too early to trust the peso

Between May 28 and May 30, several datapoints and market readings appeared that need to be read together. The picture is straightforward: there was one-off relief in debt management, but not a strong enough change in risk perception to shield the dollar or Colombian assets.

The TRS brought relief, not a reset
Debt
A signal the market did acknowledge Valora Analitik reported on May 29 that the Ministry of Finance completed the full cancellation of the Swiss franc Total Return Swap, an operation read as a tactical improvement to lower borrowing costs and better organize exchange-rate exposure.
But the relief is tactical, not structural The same report showed the dollar opening at COP 3,645 and trading in a cautious range ahead of the election. That suggests tactical calm, not full confidence. If the market applauds one technical operation but still doubts the broader fiscal story, support for the peso remains thin.
The political premium is still there
Markets
JPMorgan sees risk that is still underpriced Bloomberg Línea reported on May 29 that, in JPMorgan's view, the Colombian peso, TES bonds, and equities still do not fully reflect fiscal deterioration or political uncertainty. That is uncomfortable because it implies the exchange rate can still correct if the market decides it has become too relaxed.
The risk is asymmetrical for the peso According to the same analysis, the COP faces clearer depreciation risks than upside appreciation scenarios. In plain terms, the dollar does not need a massive shock to recover ground. A political or fiscal disappointment would likely be enough.
Labor holds up, but does not change the story
Activity
The data avoided an immediate scare DANE reported on May 29 that Colombia's national unemployment rate for April stood at 8.8%, similar to the same month in 2025. That helps sustain the view of an economy that is still resisting and avoids a sudden collapse in domestic confidence.
But markets are watching something deeper A labor market that is not breaking down is positive, yet it does not offset weak investment, uncertainty over fiscal adjustment, or caution about the future rate path. That is why the jobs figure brought stability, not a narrative shift for the peso.
The fiscal backdrop still matters more
Confidence
The deficit remains at the center of the debate On May 28, El País noted that Colombia closed 2025 with a fiscal deficit of 6.4% of GDP, the second highest among Latin America's large economies, while the primary deficit reached 3.5% of GDP, above the official target. That backdrop explains why an operational improvement is not enough to clean up risk perception.
This is also where BanRep's room gets defined When fiscal adjustment looks incomplete and institutional credibility reenters the debate, markets start assuming Banco de la República will have less freedom to soften its stance without hurting the peso. That is why dollar demand can revive even during apparently quiet sessions.

What happened over these hours is not contradictory. It is a logical sequence. The government secured a useful technical signal on debt management, and that helped moderate short-term anxiety. At the same time, the market reminded everyone that the main issue is not one financial operation, but Colombia's ability to restore fiscal credibility and institutional stability.

Under that reading, the peso sits in an uncomfortable spot. It is not facing an open crisis, but it is not in an environment that justifies lower vigilance either. If the underlying adjustment still looks partial, if politics injects more volatility than necessary, and if investors conclude that risk is underpriced, the dollar quickly becomes attractive again.

The thesis for the next few days is simple: technical relief can buy time, but it cannot buy lasting confidence. And without lasting confidence, any apparent strength in the peso can evaporate much faster than the market can celebrate one good operational headline.