2 minutes, by Read this article (Adds comment, updates prices) Reuters, July 2 – Colombian markets were under pressure on Friday, a day after Fitch became the second major credit rating agency to cut Colombia’s credit rating to “junk.” Fitch’s move comes after S&P Global dropped the investment grade category in May. Two of the world’s top three rating agencies have downgraded Colombia’s credit rating, potentially pushing some holders of Colombian debt to sell. The premium investors demand to keep Colombian debt over safe haven US Treasury bonds increased by 6 basis points (bps) to 256 bps, the highest level since early October 2020, according to the JPMorgan EMBI index. IHS Markit data revealed that five-year credit default swaps jumped 6 basis points to 143 basis points, while the Colombian peso fell as much as 0.6 percent in early local trading before recovering. According to Alberto Ramos, Goldman Sachs’ chief of economics for Latin America, the rating downgrade “was to a great extent predicted and deserved given recent fiscal, political, and societal developments, and the deterioration of policy implementation backdrop.” Colombia’s central bank’s “degrees of freedom to maintain a high level of monetary accommodation have decreased dramatically” due to increased fiscal, political, and social risk premia and a worsening inflation outlook, he noted. Moody’s is largely expected to downgrade Colombia, which is still two notches below investment grade. (Marc Jones and Rodrigo Campos contributed reporting; Karin Strohecker wrote the story; Chizu Nomiyama edited it.) )/n
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