UPDATE 1-Tunisian Bonds Crumble As Political Crisis Intensifies

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LONDON, July 26 (Reuters) – Hard currency bonds issued by Tunisia’s central bank fell sharply on Monday after the government’s dismissal by the country’s president left him facing his biggest crisis in a decade of democracy .

The 2027 and 2024 bonds both fell more than 5 cents to their lowest level in more than a year, with the former slumping to 86.57 cents, according to Tradeweb data.

The 2025 dollar-denominated issue slipped 4.8 cents to trade at 83.88 cents to the dollar, its lowest level in more than 14 months, the data showed.

President Kais Saied said on Sunday he would assume executive power with the help of a new prime minister in a move his opponents have called a coup. This is the biggest challenge to date for the democratic system that Tunisia introduced in a 2011 revolution.

“President Saïd’s decision to freeze legislative work has led Tunisia to a new constitutional crisis which is much more acute, in our opinion, adding increased risks to political and social volatility in the weeks to come,” wrote the Barclays analysts Brahim Razgallah and Michael Kafe in a study. remark Monday.

Five-year credit default swaps for Tunisia’s central bank hit 751 basis points, up one basis point from Friday’s close, according to data from IHS Markit. The level has almost doubled in the past year.

Tunisia’s prospects depend in part on its ability to obtain new financing from the International Monetary Fund. Tunisia is seeking a $ 4 billion loan over three years to help stabilize its balance of payments after its current account deficit widened to 7.1 percent of GDP last year.

In a report released in May, the S&P rating agency said that a sovereign default could cost Tunisian banks between $ 4.3 billion and $ 7.9 billion, which is equivalent to 55 to 102 percent of the country’s total equity. banking system or 9.3 to 17.3% of nominal GDP forecast for 2021.