(Bloomberg) — An unfolding dispute between President-elect Donald Trump and Panama over one of the world’s most important waterways is straining the nation’s assets.
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Panama bonds fell across the curve on Monday morning, the biggest drop in emerging markets after Trump threatened to reassert U.S. control of the Panama Canal if the nation did not reduce transit fees. President José Raúl Mulino was quick to reject the threat, but the developing dispute added to traders’ concerns about Panama’s prospects.
Bonds due in 2036 fell 0.7 cents on the dollar and the cost of insuring against a sovereign default jumped to the highest level since February at the close amid thin trading, according to prices compiled by Bloomberg.
The waterway, built by the U.S. Army Corps of Engineers more than a century ago, is one of the biggest sources of cash for the government, which is already under pressure after the sudden closure of a major copper mine last year. past. What’s more, it is on the verge of losing its investment-grade credit rating after multiple recent downgrades.
“It’s additional attention that Panama doesn’t need right now,” said Nathalie Marshik, managing director of HSBC in New York.
Bonds have been the worst bet among emerging market countries this quarter, losing 8.5% in that period, according to a Bloomberg index.
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