The Ecuadorian authorities surprised the international markets yesterday with a sovereign bond issue to get 1,000 million dollars to cover their financing needs this year.
Investors and analysts consulted by EXPRESO expressed their surprise and concern after the last operation. According to its criteria, the market expected an issue of papers after an agreement with the International Monetary Fund (IMF), which could provide reassurance and lower interest.
Yesterday, Ecuadorian authorities were looking for buyers of 10-year bonds and an interest rate of 11%, the highest issued in dollarization and the highest in emerging markets since 2011, after a bond issue of Venezuela, according to Bloomberg estimates, the platform specialized in finance and business.
However, at the end of the operation, the bond interest rate reached 10.75%.
“The markets are disappointed. There is no appetite for bond issues without an agreement with the IMF. I believe that the high interest rate of the new issue and the low amount reaffirm that the capital markets are not a reliable source of money for a financing program of between 8,000 and 9,000 million dollars for this year, “said Siobhan Morden, Strategist for Latin America of Nomura Securities, from New York.
However, the Ministry of Economy and Finance (MEF) says otherwise. According to his statement, yesterday large investment funds and other investors showed their intention to obtain Ecuadorian bonds above 3,000 million dollars.
“Ecuador has always been attentive to a window of opportunity to go out into the markets and this issue does not mean that the permanent dialogue and communication with other potential sources of financing, such as multilateral organizations and China, is closed,” Martinez said in the official gazette. .
For Edwin Gutierrez, director of emerging market sovereign debt in Aberdeen, in London (England), it is “strange” that Ecuador has issued bonds yesterday.
“We thought they would make a deal with the IMF and then issue them. I know that Lenin wants to maintain an agreement until after the local elections, so maybe they could not wait to broadcast until then, “Gutiérrez said.
Economic analyst José Orellana Giler said that yesterday’s issue shows desperation to get the almost 10,000 million dollars required this year.
At the end of 2018, Ecuador got 900 million dollars from China and a promise of 3.5 billion more.
The sovereign bond is a bond issued by a government; its rate is expressed, generally, on a treasury bond of the United States government plus the country risk.
Countries issue bonds to obtain financing, whose interest rate depends on the risk of the country that issues them.
It is an indicator that reflects the possibilities of a nation to fulfill, in the agreed terms, the payment of its external debt, either to the capital or its interests. It is prepared by the American bank JP Morgan.
The other sources
Last year, according to the authorities, a promise of debt of 3,500 million dollars was opened, after obtaining a credit for 900 million dollars at 2% interest and 20 years term.
The authorities indicate that they continue to dialogue with multilateral organizations. Last week, the IMF said that Ecuador has not requested an agreement.
The Deputy Minister of Finance, Santiago Caviedes, said that a securitization of oil sales is being prepared to obtain financing this year. (I)