Bonds from Ecuador are getting a breather after JPMorgan Chase & Co. recommended buying the battered debt ahead of a snap election.
(Bloomberg) — Bonds from Ecuador are getting a breather after JPMorgan Chase & Co. recommended buying the battered debt ahead of a snap election.
Notes due in 2035 and 2040 were among the biggest gainers in emerging markets Wednesday, according to indicative pricing compiled by Bloomberg. With the notes trading for less than 35 cents on the dollar, JPMorgan strategists said the risks ahead of the Aug. 20 vote are priced in and recommended an overweight position.
“At current levels, the bar for further underperformance seems high while the upside is significant,” strategists Gorka Lalaguna, Lucila Barbeito and Ben Ramsey wrote in a note to clients Wednesday.
Ecuador also obtained $1 billion from the World Bank and the Inter-American Development Bank this month, key liquidity as it braces for the El Niño climate phenomenon expected to hit within months.
The country’s dollar bonds have lost more than 25% this year, one of the worst performances in emerging markets, after President Guillermo Lasso saw voters reject referendum proposals and political opponents mounted an impeachment campaign, prompting him to close congress, which triggered the snap vote.
Polls suggest the presidential vote will head to a second round. Leftist candidate Luisa Gonzalez, endorsed by former President Rafael Correa, who defaulted in 2008, appears set to reach a second round, with a pack of other candidates from left to right vying for a spot against her.
A runoff election will be held Oct. 15, if needed.
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