Bonds

Federal government considers allowing states to issue bonds to alleviate fiscal crises

Brazilian Finance Minister Henrique Meirelles noted on 17 November 2016 the Brazilian Federal Government may allow states to issue bonds to alleviate fiscal crises (Folha de S. Paulo, Valor). In a meeting with foreign investors in New York, Meirelles confirmed the Federal Government would not compromise its fiscal adjustments to help distressed states. However, he offered that the Federal Government is currently studying solutions to aid these states by the end of 2016, of which state bond issuance is a real possibility. On the subject of investor trust, reasonably a concern after Rio de Janeiro, a state currently facing a fiscal crisis, saw the arrest of two former governors in two days on corruption charges, Meirelles noted investors in New York still received the message of state-issued bonds well. Meirelles will meet with President Michel Temer during the week of 21 November 2016 to discuss the subject in more detail.

J.P. Morgan: Venezuela has world's highest bond risk

According to the J.P. Morgan Emerging Market Bond Index (EMBI), Venezuelan sovereign bonds carry the highest risk level in the world (El Nacional, 15 November 2016). Venezuela received 2,169 basis points on the EMBI, far exceeding Ecuador at 746 basis points, Ukraine at 704 basis points, Egypt at 454 basis points, and Argentina at 438 basis points (La Patilla). Venezuela's high investment risk is exceptional within Latin America, as the EMBI rates Colombia at 227 basis points, Uruguay at 221 basis points, Mexico at 217 basis points, Panama at 166 basis points, and Peru at 158 basis points (El Nacional). 

Moody’s downgrades El Salvador’s government bond ratings due to financial crisis

Moody’s Investors Services announced on 7 November 2016 that it downgraded El Salvador’s issuer and long-term debt ratings from B1 to B3 with a negative outlook after concluding a review for downgrade that began on 11 August (El Diario de Hoy). The ratings agency downgraded El Salvador due to significant increase in liquidity risks, as well as the Legislative Assembly’s inability to pass a measure to release long-term debt via bonds to solve the short-term debt issue and finance government operations. Moody’s also lowered the long-term foreign-currency bond and deposit ceilings from Ba2 to B1, while short-term foreign-currency bond and deposit ceilings remained the same (Moody's).