Morgan Stanley removes ‘dislike’ stance from Ecuador’s bonds

By Thomson Reuters Feb 20, 2024 | 4:31 AM

LONDON (Reuters) – Morgan Stanley removed its “dislike” stance on Ecuador’s bonds on Tuesday less than a month after adding it, saying the government had made more progress than expected although a default in the next couple of years remained a risk.

Newly-announced measures such as a VAT increase should make it easier for Ecuador get a new IMF programme, the investment bank’s analysts said, adding that authorities won’t want to be in default when elections come around early next year.

“That said, we do not see enough reasons to move straight to a like stance,” they added in a note laying out their view on Ecuador’s bonds, most of which are languishing at less than half their face value despite a recent rally.

“All financing needs for 2024 are not in place yet and perhaps the IMF is not a done deal yet either,” the note said. Additionally, if the country is still unable to tap funding markets come 2026, “markets will maintain a high risk of a need for another restructuring”.

Ecuador, long a haven for foreign retirees, has been gripped by spiralling violence since the coronavirus pandemic battered the South American country’s economy.

A group of masked, armed men stormed the set of a TV station during a live broadcast last month, a presidential candidate was gunned down as he left a rally during last year’s elections and hundreds of inmates have been killed in prison riots.

(Reporting by Marc Jones; editing by Christina Fincher)