December 18, 2024 21:32 GMT
EM LATAM CREDIT: “Moody's periodic review of Government of Colombia" - BBG
EM LATAM CREDIT
Republic of Colombia (COLOM; Baa2 neg /BB+ neg /BB+)
Moody’s rating sticks out as too high relative to the other agencies and relative to market pricing, yet in this periodic review they affirm the appropriateness of the IG rating. Impact neutral as market pricing hasn’t been consistent with that rating for over three years.
- COLOM benchmark bonds trade more than 100 bps wider than lower rated Dominican Republic (DOMREP; Ba3pos/BB/BB-pos), and much wider than other lower rated countries like Brazil (BRAZIL; Ba1pos/BB/BB) and Costa Rica (COSTAR; Ba3pos/BB-pos/BB) as you can see below.
- Fiscal policy is a critical factor with Moody’s giving a lot of credit for a good track record of maintaining fiscal balance while other agencies have more heavily weighted weak economic growth and concerns about rising fiscal deficits that may come from new government policies like pension and health care reform as well as decentralization.
- Maintaining the fiscal rule has become critical with the newly appointed Finance Minister assuring the market that necessary spending cuts will get approved and implemented.
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