Bond Market Shows Traders Putting Mexico on the Edge of Junk
- Sovereign spread is much wider than current rating suggests
- Risk lies with state-owned company Pemex and its giant debt
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Mexican bonds are teetering on the edge of junk as state-owned Pemex, the world’s most-indebted oil company, threatens to drag down the nation’s finances.
Government-debt spreads are now higher than those paid by emerging markets rated two levels below Mexico’s BBB+, according to data compiled by Bloomberg. After Fitch Ratings cut Pemex last month to just one notch above junk, the bonds took a turn for the worse amid speculation that the country would also be downgraded.