Ecuadorean government debt prices plummeted on Friday as investors sold off the credit amid continued rhetoric by the government-elect that will renegotiate the external debt, creating jitters ahead of year-end closing portfolios.
Yield spreads of Ecuador's government bonds widened 54 basis points to 666 bps over US Treasuries, shedding 6.86 percent in total returns on the day, according to J.P. Morgan's Emerging Markets Bond Index Plus (EMBI+). The credit lost 5.4 percent in returns in November, but still, so far this year it has gained 9 percent of investment.
President-elect Rafael Correa and his designated Finance Minister Ricardo Patino have told the Ecuadorean press of their intention to reduce the load of debt, and their commitment to renegotiate their foreign debt. Ecuador's global bond due in 2015 fell 8.000 percentage points to bid 92.000 and to yield 10.783 percent, the highest level on record on Friday as investors sold off the credit to close the year with positive results.
"For now we are going to be subject to the volatility injected by the statements Correa is going to make regarding policy but that is not factual until he makes it policy and that won't happen for another month at least," said Enrique Alvarez, emerging markets debt strategist at IDEAglobal.
Brazil's global bond due 2040, considered the emerging market benchmark paper due to its high liquidity, fell 0.375 to bid 132.563 in price and to yield 6.114 percent. In other news, Uruguay has paid off its full debt of some $1.09 billion to the International Monetary Fund, following the footsteps of its larger neighbours Brazil and Argentina, which both cancelled their IMF debts within the last year.