Ecuador Set to Pay Highest Bond Yield Since 2011
Ecuador Bonds Tumble as Government Seeks to Raise
(Bloomberg) -- Ecuador’s $1 billion debt sale surprised investors as the OPEC nation offered one of the steepest yields since the financial crisis -- a move that sparked questions about its talks with the International Monetary Fund. Bonds slumped.
Traders weren’t expecting Ecuador to sell debt until officials completed negotiations with the IMF, said Shamaila Khan, AllianceBernstein’s director of emerging-market debt. The new bonds due in 2029 yielded 10.75 percent, according to a person familiar with the matter, who asked not to be identified. Finance Ministry officials had previously ruled out placements at double-digit rates. Sovereign notes due 2028 slid the most since November to 87.44 cents as of 4 p.m. New York time.
Ecuador’s bonds rallied last week after IMF Managing Director Christine Lagarde met President Lenin Moreno, backing his pledge for economic reforms. While he said during a visit to China last month that Ecuador had secured a $900 million loan -- at 6.5 percent -- and two credit lines totaling $3.5 billion, the Asian nation hasn’t yet disbursed any of the funds.
"Ecuador has always been alert to a window of opportunity to go out into the markets," the finance ministry said in a statement. "The bond sale doesn’t mean that permanent dialogue and communications with other potential sources of funding, such as multilateral organizations and China, are closed."
Still, unless the government soon clarifies details of a potential IMF deal, "markets will really start to panic about sources of funds," said Siobhan Morden, head of Latin American fixed-income strategy at Nomura Securities International in New York.
"They’re very low on funds and haven’t made enough efforts to achieve an accord with the IMF," said Vicente Albornoz, dean of economics at Universidad de las Americas in Quito.
--With assistance from Ben Bartenstein.
To contact the reporter on this story: Stephan Kueffner in Quito at skueffner1@bloomberg.net
To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net, Alec D.B. McCabe
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