EM debt flat to weaker in light trade; Ecuador underperforms with downgrade; Turkey steady

By Rebecca Melvin

New York, Aug. 20 – Emerging markets debt was mostly flat to lower in light trade on Monday, to start what was expected to be a quiet week as late summer vacation schedules zap trading desks of personnel.

Ecuador’s sovereign notes underperformed the market with most of the country’s U.S. dollar-denominated curve down 0.5 point after Fitch Ratings downgraded Ecuador’s long-term foreign currency issuer default rating to a B- with a stable outlook and a B short-term local currency issuer default rating.

Ecuador’s 7 7/8% notes due 2028 traded down about 0.5 point to 86¾ bid, 87.40 offered, and Ecuador’s 8 7/8% notes due 2027 were down 0.5 point to 92.14 from 92.64 on Friday.

“The downgrade of Ecuador’s long-term foreign currency issuer default rating to B- reflects evidence of increased fiscal financing constraints amidst a steady deterioration of Ecuador’s key metrics, including rapidly rising government debt and interest burden as well as weaker economic growth performance relative to the B median,” Fitch said in a news release.

Turkey’s sovereign bonds were better offered but not down notably after two ratings agency downgrades on Friday from S&P Global Ratings and Moody’s Investors Service, with the ratings news “kind of ‘in the price’ already,” a London-based trader said.

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