By Devika Krishna Kumar, Stefanie Eschenbacher and
MEXICO CITY The bonds of Mexican state oil company Pemex took a beating on Friday as investors fretted over chances that Moody's ratings agency could soon follow Fitch in downgrading the debt to "junk," which would trigger a forced sell-off.
By Devika Krishna Kumar, Stefanie Eschenbacher and Marianna Parraga
By Devika Krishna Kumar, Stefanie Eschenbacher and
MEXICO CITY Fitch on Thursday became the first major ratings agency to downgrade the debt of Mexican oil company Pemex to "junk" status, in a major setback for President Andres Manuel Lopez Obrador's plans to revive the struggling state-run firm.
MEXICO CITY, June 6 Investors at six of the
world's largest asset managers, all of whom own the bonds of
Mexican national oil company Pemex, expect them to be downgraded
to "junk" status within months.
MEXICO CITY In a double blow for Mexico, credit ratings agency Fitch downgraded the nation's sovereign debt rating on Wednesday, citing risks posed by heavily indebted oil company Pemex and trade tensions, while Moody's lowered its outlook to negative.
MEXICO CITY Investors said on Thursday that the downgrade for Mexico's sovereign was overdue, given the ample risks posed by heavily indebted state oil company Pemex and recent trade tensions with the United States.
By Stefanie Eschenbacher and Aaron Saldanha
MEXICO CITY, June 6 Investors said on Thursday
that the downgrade for Mexico's sovereign was overdue, given the
ample risks posed by heavily indebted state oil company Pemex
and recent trade tensions with the United States.
Credit ratings agency Fitch downgraded the nation's
sovereign debt rating late on Wednesday while Moody's lowered
its outlook to negative.
CATHY HEPWORTH, CO-HEAD OF EMERGING MARKETS DEBT AT PGIM
"The recognition that Mexico, the sovereign, is overrated at A3
and BBB+ should not be a surprise given the policy uncertainty
under the current regime, and more specifically, the more
explicit support that the sovereign will likely give Pemex."
"There may be a more formal recognition that in analyzing
Mexico, one needs to consider the combined picture. This could
mean that Pemex remains investment grade."
ABBAS AMELI-RENANI, PORTFOLIO MANAGER, GLOBAL EMERGING
MARKETS, AT AMUNDI
"The outlook change from Moody's was more expected than the
rating cut from Fitch. We expect Mexico's ratings to stabilize
at BBB for the rest of the year before further pressure arises
in 2020 as the policymaking framework deteriorates."
"The sovereign's approach towards Pemex has been
inconsistent under the new administration and a turnaround
strategy is still missing."
"The most supportive policy from the government would be tax
breaks that would allow Pemex to become cash flow positive in
the long run. We are yet to see meaningful signs of that
SHAMAILA KHAN, DIRECTOR OF EMERGING MARKET DEBT STRATEGIES
"Mexico sovereign downgrade has less of an impact directly on
sovereign bonds as spreads already reflect credit deterioration.
However, it is probable that the sovereign downgrades lead to
junk status for Pemex debt in the near term and that is the
AARON GIFFORD, EMERGING MARKETS SOVEREIGN ANALYST, FIXED
INCOME DIVISION, AT T. ROWE PRICE
"Mexico has been in the eye of the storm with policy uncertainty
domestically, a flare-up in trade and immigration tensions with
the U.S., lower oil prices, and general risk-off."
"At times like these, Mexico needs to tread lightly.
Unfortunately, the government has chosen a path that many
investors view as unsustainable."
"For the sovereign, it doesn't mean much as it's still
safely investment grade. However, it does put downward pressure
on ratings for cooperates on the brink of losing investment
grade, including Pemex."
GORKY URQUIETA, GLOBAL CO-HEAD OF EMERGING MARKET DEBT AT
"It's no surprise and largely, if not fully, priced in. The
market has been anticipating a fiscal deterioration, mostly
related to Pemex large funding requirements dragging down the
sovereign's balance sheet."
"The Mexican sovereign trades like it has a BBB- credit
already. However, the silver lining is this at the margin could
make (Mexican President Andres Manuel Lopez Obrador) rethink his
approach to dealing with Pemex and oil reforms at large."
JAMES BARRINEAU, HEAD OF EMERGING MARKETS DEBT RELATIVE,
"For Mexico, the downgrades will not come as a surprise to
investors. The so far muted reaction of the currency seems to
"Although growth is slow as long as fiscal discipline is
maintained we do not see Mexico at risk of further downgrades
that would imply a risk of losing investment grade status."
LUIS GONZALI, PORTFOLIO MANAGER, FRANKLIN TEMPLETON
"Even if this is not good news, the decisions of both ratings
agencies were widely expected, considering how Mexican sovereign
bonds and credit default swaps have traded in recent months."
"It is positive that Fitch has changed the outlook from
negative to stable, which eliminates de possibility that there
will be another downgrade in the short term."
(Reporting by Stefanie Eschenbacher in Mexico City and Aaron
Saldanha in Bengaluru; Editing by Lisa Shumaker)
MEXICO CITY The financial package unveiled by the Mexican government earlier this week for Pemex is a step in the right direction, but still "very far" from meeting the state oil company's needs, Fitch Ratings said on Thursday.