High yields in returning Ecuador bonds provide opportunities for risk takers
June 16, 2014 5:33 am
After defaulting on their debt in 2008 worth $3.2 billion, Ecuador is set to once again participate in the international debt market by offering bonds attractive enough for investors to grab despite the risk.
The reentry of the south american country in the bond market may happen as early as this week, but buyers are already seen to be lining up ready to exchange their doubts over Ecuador’s not so promising credit history for bonds with yields forecast to be close to 7%. Ecuador began marketing the bonds in the London and New York exchanges last week and is expected to sell off at least $700 million in US dollar bonds, possibly bringing ratings into junk territory.
Attention to Ecuador represents the rising interests among investors for debts in emerging markets. With developed economies experiencing low volatility and low rates, Ecuadorian bonds are a welcome change that may lure in investors who are willing to disregard the risk involved says financial group Brown Brothers Harriman.
According to JPMorgan’s Nexgem index for exotic sovereign bonds, average yields have decreased to 6.85% last week from the beginning of the year’s 7.85%. Despite the dip, it has had a return of 9.8% so far in 2014.
Ecuador’s current move reflects a desire to move forward past Chinese funding where it has relied much on since being barred from borrowing internationally in 2008. Ecuadorian research firm Grupo Spurrier says that, beginning in 2009, $19 billion have been committed by China.
The stance of President Rafael Correa, who had originally called international debt illegitimate in 2008, may pose a problem though in finalizing the bonds deal. Nevertheless, the oil producing country has made good with payments so far in their existing $650 million bond ahead of its 2015 maturation and had an economic growth rate of 4.5% in 2013.
The material has been provided by InstaForex Company – www.instaforex.com
After defaulting on their debt in 2008 worth $3.2 billion, Ecuador is set to once again participate in the international debt market by offering bonds attractive enough for investors to grab despite the risk.
The reentry of the south american country in the bond market may happen as early as this week, but buyers are already seen to be lining up ready to exchange their doubts over Ecuador’s not so promising credit history for bonds with yields forecast to be close to 7%. Ecuador began marketing the bonds in the London and New York exchanges last week and is expected to sell off at least $700 million in US dollar bonds, possibly bringing ratings into junk territory.
Attention to Ecuador represents the rising interests among investors for debts in emerging markets. With developed economies experiencing low volatility and low rates, Ecuadorian bonds are a welcome change that may lure in investors who are willing to disregard the risk involved says financial group Brown Brothers Harriman.
According to JPMorgan’s Nexgem index for exotic sovereign bonds, average yields have decreased to 6.85% last week from the beginning of the year’s 7.85%. Despite the dip, it has had a return of 9.8% so far in 2014.
Ecuador’s current move reflects a desire to move forward past Chinese funding where it has relied much on since being barred from borrowing internationally in 2008. Ecuadorian research firm Grupo Spurrier says that, beginning in 2009, $19 billion have been committed by China.
The stance of President Rafael Correa, who had originally called international debt illegitimate in 2008, may pose a problem though in finalizing the bonds deal. Nevertheless, the oil producing country has made good with payments so far in their existing $650 million bond ahead of its 2015 maturation and had an economic growth rate of 4.5% in 2013.
The material has been provided by InstaForex Company – www.instaforex.com
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