Ecuador Bonds Plunge to Record as IMF Calendar Hangs in Balance

(Bloomberg) -- Ecuador’s sovereign bonds plunged to a record on concern the International Monetary Fund will delay disbursement of the next tranche of a $4.2 billion loan.

The notes are the worst-performing in emerging markets Friday as the government and the IMF discuss a new calender for disbursals. Risk sentiment was made worse as cases of the fast-spreading Covid-19 virus topped 100,000, pressuring oil prices to fall by the most since 2015.

Ecuador’s dollar-denominated debt due in 2028 dropped 4.5 cents on the dollar to 59.3 cents, headed for its lowest on record. Notes maturing in 2022 and 2030 also marked new lows.

“The delay in disbursements complicates the government’s financing outlook amid a perfect storm from Coronavirus,” said Risa Grais-Targow, a director at Eurasia Group. “But the IMF is continuing to work with the government and will likely remain quite flexible.”

The external shock from the virus may even offer an excuse for the IMF to show extra flexibility, Grais-Targow said. Ecuador has been working with the IMF to re-assess its planned disbursals since an IMF mission visited Quito Feb. 11 to 20.

Spreads over U.S. Treasuries widened by about 218 basis points Friday, more than any nation in the JPMorgan EMBI Global Diversified Sovereign index save for Lebanon.

Ecuador’s finance ministry said in a text that the government was still working with officials from the IMF, and “this joint work will result in scheduled disbursements according to a calendar that is being agreed upon.”

To contact the reporters on this story: Sydney Maki in New York at smaki8@bloomberg.net;Stephan Kueffner in Quito at skueffner1@bloomberg.net

To contact the editors responsible for this story: Carolina Wilson at cwilson166@bloomberg.net, Philip Sanders

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