Last Year's Big Bond Winners Aren't Looking So Fantastic Now

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  • Debt from Venezuela, Ecuador and Gabon now underperforming
  • Mozambique and Suriname have biggest turnaround stories

A visitor views the electronic board displaying stock activity at the Brasil Bolsa Bacao stock exchange in Sao Paulo.

Photographer: Patrícia Monteiro/Bloomberg

Developing-nation debt traders who stuck with 2016’s top securities took a hit this year.

That’s because last year’s best emerging-market dollar bond bets are posting the starkest reversals. Venezuela, Ecuador and Gabon, which led the pack in 2016, had some of the worst changes, according to data compiled by Bloomberg on debt from 69 developing nations. Meanwhile, last year’s laggards, Mozambique and Suriname, have had the best improvements.

“As the market backdrop gets increasingly high-stakes, even risk-on investors will want to hedge and cut back at the margin,” said Sonja Gibbs, a senior director for global capital markets at the Institute of International Finance. “Taking profits on some of these higher-risk dollar bonds that have had great returns is one way of doing that.”

The Bloomberg Barclays index of emerging-market dollar bonds has advanced 7.6 percent this year, heading for its fourth year of gains.

Here’s a look at what’s changed in those countries:


Nicolas Maduro

Photographer: Carlos Becerra/Bloomberg

The world’s riskiest sovereign debt got even riskier when the Trump administration levied additional sanctions on Caracas in July and August. While Nicolas Maduro’s government continues to demonstrate its strong willingness to pay, more and more investors are questioning how long it will have the ability to make good on its obligations.


Lenin Moreno

Photographer: Alejandro Granadillo/Bloomberg

In pushing a platform to overhaul the economy, fight corruption and reinstate term limits, recently-elected President Lenin Moreno has separated himself from former socialist leader Rafael Correa. But his eagerness to enlarge the debt load in a nation known as a serial defaulter has some money managers heading for the hills.


Almost a year into his presidency, Nana Akufo-Addo’s efforts to improve the business environment have yet to bear fruit with investors. As the country tries to reign in spending, it has embarked on a sale of non-sovereign bonds to settle energy arrears. The country’s public debt exceeded 70 percent of gross domestic product at the end of last year.


With its politics still fraught after a contested election last year, Africa’s second-largest copper exporter faces a debt burden that is making investors nervous. When copper prices fell, the country began negotiations with the International Monetary Fund for a $1.3 billion aid program. The talks were put on hold amid political uncertainty. Despite copper volatility, the IMF said that the near-term outlook for the Zambian economy has improved in recent months.


Even as Iraq’s years-long struggle with the Islamic State extremist group appears to be winding down, the oil export-dependent nation is facing new turmoil following the vote for independence from the country’s Kurdish minority last month. The vote and subsequent conflict disrupted output at some of Iraq’s northern oil fields, including the giant Kirkuk reservoir. With the country’s key revenue source in jeopardy, investors are looking twice.


Eight years into the presidency of dictator Ali Bongo Ondimba, who took over after his father’s four-decade rule, the Central African nation has faced rating cuts as its public debt swells. Gabon’s economic crisis has gotten so bad that the government has reduced allowances for ministers to travel internationally.

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