Ecuador Set to Pay Highest Bond Yield Since 2011

(Bloomberg) -- Ecuador’s $1 billion debt sale surprised investors as the OPEC nation offered one of the steepest yields since the financial crisis -- a move that sparked questions about its talks with the International Monetary Fund. Bonds slumped.

Traders weren’t expecting Ecuador to sell debt until officials completed negotiations with the IMF, said Shamaila Khan, AllianceBernstein’s director of emerging-market debt. The new bonds due in 2029 yielded 10.75 percent, according to a person familiar with the matter, who asked not to be identified. Finance Ministry officials had previously ruled out placements at double-digit rates. Sovereign notes due 2028 slid the most since November to 87.63 cents as of 2:31 p.m. New York time.

Ecuador’s bonds rallied last week after IMF Managing Director Christine Lagarde met President Lenin Moreno, backing his pledge for economic reforms. While he said during a visit to China last month that Ecuador had secured a $900 million loan -- at 6.5 percent -- and two credit lines totaling $3.5 billion, the Asian nation hasn’t yet disbursed any of the funds.

Unless the government soon clarifies details of a potential IMF deal, "markets will really start to panic about sources of funds," said Siobhan Morden, head of Latin American fixed-income strategy at Nomura Securities International in New York.

"They’re very low on funds and haven’t made enough efforts to achieve an accord with the IMF," said Vicente Albornoz, dean of economics at Universidad de las Americas in Quito.

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