Yields on Ecuador’s 2015 dollar bonds jumped the most since January as the price of oil fell to the lowest this year, cutting revenue for the South American country’s government.
The yield on the country’s 9.375 percent debt due 2015 rose 37 basis points, or 0.37 percentage point, to 9.04 percent as of 12:30 p.m. in Quito, its biggest increase on a closing basis since Jan. 26, according to data compiled by Bloomberg. The price fell 1.12 cents to 100.98 cents on the dollar.
Ecuador has seen the price of its Oriente crude retreat 11 percent this month, pacing losses in markets for oil traded in New York, amid increasing global supply and concern about Europe’s debt crisis. Lower prices mean less revenue for the government, which defaulted on $3.2 billion of bonds in 2008 and 2009, Fernando Simo, chief executive officer of Quito-based brokerage Casa de Valores Produvalores SA, said today.
“It’s clearly because of the fall in the price of oil,” Simo said in a telephone interview. “The price of one commodity determines the health and solvency of our economy.”
Ecuador, the smallest member of the Organization of Petroleum Exporting Countries, uses oil exports to finance about 41 percent of government spending, according to the 2012 budget. The Finance Ministry forecasts a $4.23 billion budget deficit this year, or 16 percent of total spending.