Morgan Stanley Sees More Downside Risk to Ecuador Sovereign Debt

Morgan Stanley says Ecuador sovereign bonds have “significantly more downside” risk than upside reward amid potential market volatility following the removal of diesel subsidies and a referendum at the end of November, according to a Tuesday note.

• “Waiting for both the subsidy removal and upcoming referendum to pass is more prudent given the historical potential for negative surprises in Ecuador,” the bank’s strategist Simon Waever wrote. “While an improving credit story with potential to rally, the risk/reward is negative”
  • Waever recommends buying El Salvador’s 2050 notes versus Ecuador’s 2040s
• Expects the nation to end 2025 with a non-financial public sector ...