Moody's cuts El Salvador bonds to Ba1

Moody's Investors Service said it downgraded El Salvador's foreign-currency government bond ratings to Ba1 from Baa3, along with its country ceiling for foreign-currency bank deposits to Ba1. The Baa3 country ceiling for foreign-currency bonds was not affected.

The outlook is negative.

The downgrades reflect a deterioration in the country's sovereign credit profile that will likely extend into 2010 as government debt metrics are projected to increasingly diverge from those corresponding to Baa-rated governments, Moody's said.

El Salvador has been subject to severe shocks that have exposed underlying vulnerabilities associated with its condition as a small open economy with a high dependence on the United States and a relatively limited degree of diversification, the agency said.

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