The Colombian peso, which had a significant risk premium in 2022 after President Petro’s election, has now reached a point where it appears expensive compared to its bonds and spreads. Some BofA strategists suggest the COP should incorporate a higher risk premium and recommend selling COP against a basket of LATAM currencies, adding that a more aggressive interest rate cut cycle in Colombia, compared to other regional economies, will reduce the COP’s favorable carry. The strategists anticipate the central bank’s terminal rate to be 6% by 2025.