Fiesta in Ecuador: after the elections, bonds soar by more than 20% and already bring in less than 10% – economic, financial and economic news

Ecuadorian bonds soar more than 25% after yesterday’s election result and their yields plummet, a sign of a good market reaction. The candidate of the alliance of the right and the Social-Christian Party, Guillermo Lasso, won the presidential election this Sunday against the Classes Andrs Arauz, according to the count of almost all official control.

After the result, bonds increase by more than 20% in all sections of the curve and the country continues to produce a return below 10%. The Morgan Stanley investment bank favored positioning on these bonds.

As Wall Street enters a new week, with slight declines in the Dow Jones, S & P500 and Nasdaq, attention in the region focuses on Ecuadorian bonds, recently restructured as part of a program with the IMF .

The Ecuador 2035 bond takes off strongly during Monday’s session and runs at $ 62.7 and is up 29%. Thanks to the significant increase, its yield plummeted to 10% from the 13% it operated last week. In other words, after the election result, Ecuador can go to the markets to issue debt at a cost of 300 basis points less than last week, thanks to the fact that the political risks were dissipated after the victory. of the right-wing candidate and the defeat of populism.

The Ecuadorian bond 2040 is also showing advances of 21% which allows the yield to sharply compress spreads. The bond has fallen from 11.5% last week to currently below 10% at 9.75%.

This good reaction from bonds moves Ecuadorian debt away from the riskiest bonds in the world and will quickly price in line with similar credits to the credit risk of Ecuador like El Salvador, Costa Rica, Nigeria, Gabon or the Cameroon, which yields between 10% and 8%.

In this way, Ecuadorian debt takes off even more than that of Argentina which, along with Sri Lanka, remains the riskiest credit in the world, with its obligations at more than 21%.

Risk rose quickly from Ecuador to levels of 719 points in the opening minutes of trading on Monday from the previous 1160 points. Thus, it moves away from the worst credits in the world.

Argentina, on the other hand, remains with a country risk of 1619 points, among the highest in the world. In this way, Argentina’s country risk is more than double that of Ecuador, when it was only 500 basis points higher on Monday.

the Investment bank Morgan Stanley expected the election results to bolster Ecuadorian bonds.

Ecuadorian government bonds are expected to react “very positively” when they start trading later, Morgan Stanley predicted, after the weekend election saw banker Guillermo Lasso unexpectedly win the presidency with promises to revive the economy.

Lasso won 52% of the vote in the second round after a campaign that pitted the free market economy against the welfare plans of economist Andrs Arauz. His victory was likely facilitated by an election campaign that overturned one in six ballots.

“Bonds are expected to react very positively to election results,” Morgan Stanely said in a research note. “With a few months of support to come, including continued cooperation from the IMF, we believe the gains will continue and become optimistic,” the entity added.