Up and Down the Ladder

Recent rating changes have featured two sovereign ratings shifts by S&P; downgrading Uruguay while revising to negative the outlooks of Venezuela. Two revisions from Fitch IBCA upgrading Sweden and downgrading Venezuela, and finally Moodys upgrading Pakistan.

Amongst these recent downgrades let us highlight the downgrade of Uruguay. SandP has downgrade the oriental Republic of Uruguay to BB+ from a BBB- rating. The changes came following a January 11th revision of its outlook to negative. The agency claimed that the negative outlook reflected the difficulties inherent in reducing a persistent public-sector deficit in a weak economic environment.

Notwithstanding January 11th announcement S&P expressed its concern with the countries fiscal and structural weaknesses and downgraded its sovereign credit rating. SandP believes that Uruguay's weaknesses have been compounded by the countries minimal growth prospects, given its inherent dependence upon the Mercosur region, and by fragility in the financial sector. They stressed that the general government deficit, which amounts to about 4% of GDP in each of the last three years, may improve only marginally in 2002 (also look at Uruguay's Macroeconmic Data). Uruguay has dropped 5 positions within our World ladder.

The World Average goes up to 64.80 from 64.78

Recent rating news has attributed a significant double upgrade change for the Mexican Economy. Moody's upgraded Mexico to a Baa2 investment grade status and now remains two levels above junk. S&P became the last of the major debt rating agencies to grant Mexico the desired investment grade rating. IDEA global Mexico's equity analyst believes that most Bolsa participants already expected this upgrade and that large flows of foreign investments that were previously restricted are to be expected.

The World Average goes up to 64.78 from 64.76

In terms of sovereign rating changes recent news comes out of The Republic of Indonesia and Dominican Republic. Standard & Poor today lowered Indonesia's rating to a CCC+ and remained the countries outlook on negative. Its downgrade they noted reflected an inadequate fiscal adjustment. Political instability, institutional weakness, and the specter of geographic disintegration are reducing policy coordination, straining official creditor relationships, and unsettling financial markets. Heavy public indebtedness, & budget financing uncertainties are other key factors.

In other ratings news Dominican Republic's rating outlook was increased today to positive. Moody's indicated that the positive outlook is supported by a period of sustained economic growth where GDP has reported average annual growth in excess of 7.5% since 1996. Additionally, single-digit inflation and a manageable external position have contributed to a reinforcement of macroeconomic stability.

Recent rating changes have featured four sovereign ratings shifts by S&P. The agency has moved to downgrade Turkey and Ecuador, while upgrading the outlooks of Poland and Jordan.

S&P has downgraded Turkey from a single 'B' rating to a single-'B'-minus' rating. Notwithstanding the announcement of a new International Monetary Fund (IMF)-supported fiscal program, S&P has expressed concern with Turkey's ability to secure budget financing, and to stabilize the public debt stock, inflation, and the exchange rate. Note that on the April 2nd Fitch IBCA had already lowered Turkey's rating. Taken together, these changes have caused Turkey to lose five positions in our Ratings Ladder taking it from above Jordan to just below Bulgaria.

Meanwhile, S&P has also reduced Ecuador's rating to CCC+ from a B- and revised the outlook to negative from stable. The agency believes that Ecuador is vulnerable to external pressures due to the continued fragile state of its banks. The credit also remains with a negative outlook and S&P believes that Ecuador's ratings could be lowered further if the government's fiscal position continues to deteriorate or if there is a public break with the official creditors. Ecuador is now the third lowest rated country on our Ratings Ladder.

Poland & Kingdom of Jordan Remain unchanged in our ladder despite the recent improvement in agency assessments. Jordan's outlook has been revised to positive by S&P. This outlook revision reflects that the government has continued its effective macroeconomic management, including the gradual reduction of high fiscal imbalances, and its implementation of an impressive structural reform agenda. Poland's outlook has been improved to positive. This revision reflects Poland's continued commitment to and ongoing implementation of structural reforms, particularly in the mining, steel, energy, and defense sectors.

Argentina has been hit by a double downgrade - from BB- to B+ by S&P, and from B1 to B2 from Moody's. Coming hard on the heels of the March 20th downgrade from Fitch IBCA, these developments are causing Argentina to fall fast within the BradyNet ratings ladder. The credit has lost a further two positions today, leaving it below Azerbaijan, and just above Kazakhstan. Argentina's downgrades, as noted by S&P are the reflection of a difficult policy environment. In the face of this, the government is struggling to calm political and market pressures by introducing a workable economic program that strengthen competitiveness, reduce fiscal imbalances, and restores growth.

In other rating's news, earlier this week S&P revised its outlook on the Republic of Iceland, to stable from positive. This was not however enough to change the country's position in our Ratings Ladder. S&P cited that the outlook revision reflects growing external imbalances. The ratings agency also noted that the rating would be strengthened if domestic lending growth and these external imbalances were reduced, and structural fiscal surpluses are maintained.

Fitch IBCA has announced a downgrade of the Republic of Argentina's credit ratings in the face of the current political crisis. This downgrade takes the Argentine BradyNet rating ladder score closer to Peru, although its overall position is unchanged. Note also that earlier on Monday, Argentina was put on negative credit watch by Standard & Poor's. Their report suggests that the negative watch will be lifted if the President manages to broaden the coalition, and begins to implement measures that bolster the currency board, reduce the budget deficit and support the country's IMF programme. Of course if the govt cannot follow through, we are going to be facing a formal downgrade to B+. This would actually serve to equalize the S&P rating with that of Moody's (at B1). In terms of BradyNet Ratings Ladder implications, this S&P move would see Argentina fall two positions, leaving the credit below Brazil, and just above Azerbaijan. The Arg30 is currently trading 84 bps inside of the Braz30.

In terms of rating changes in the last week, the focus has been on the State of Qatar, Romania, and Indonesia.

Qatar was upgraded by S&P from BBB to BBB+, allowing a two rung jump within our ratings ladder, to above Malaysia and just below Saudi Arabia. S&P noted that the upgrade reflects the prospect of continued fiscal prudence, which, together with high oil and gas prices, should result in further declines in the public external debt burden.

Romania also received an outlook upgrade from S&P. This upgrade has not been enough to move Romania within our ratings ladder but it has had the effect of equalising the country's score with that of Russia. Indeed we can already see that 5 yr Euro denominated Russian and Romanian credits are already trading within 10 bps of each other (Russian debt trading marginally tighter). S&P's revision mainly reflects the country's commitment to the European Union, and improvements in its external liquidity position.

Finally, Moody's has given Indonesia's B3 rating a negative outlook. This change has not been enough to move the country's position within the Ratings Ladder where it still stands just marginally above Vietnam. Moody's understandably focus on political risk as the main n-t ratings negative.

The world average moves up to to 61.93

The upgrade was not enough to make Oman Jump one position in the Ratings Ladder but sufficient enough to leave it trailing Latvia and Barbados, however if other ratting agencies were to follow we wouldn't be surprised to see Oman around Malaysia and Saudi Arabia on our Ratings Ladder.

The world average goes up to to 61.92 from 61.90

In other ratings news, Japan has been downgraded by S&P from AAA to AA+. S&P cited that Japan's weakening fiscal position after its attempts to boost the economy through heavy spending. The downgrade has not moved Japan's position on our ratings ladder but has left it marginally above Singapore. Finally on ratings rumours, the suggestion that Fitch may upgrade Slovakia's current BB+ rating, puts this Central European credit on track to win back an investment grade rating for the first time since 1998. An upgrade from Fitch would almost equalize the country's rating's ladder standing with that of Mexico.

The world average drops to 61.90

Otherwise no other shifts in sovereign ratings have been announced. Note that in a follow-up to last week's upgrade rumours in Colombia, S&P has now denied that it plans to make any changes to the current BB (-ve outlook) rating. In affirming this rating, S&P noted that the South American country is still under significant fiscal pressure, and that peace talks between the government and rebels are not making sufficient progress. This still leaves Colombia's BradyNet Ratings ladder score lagging slightly behind that of the Philippines. Currently the Philippine 2019 bond is trading some 58 bps tighter than Colombia's 2020 paper.

The world average stays unchanged at 61.92

As regards ratings rumours, the latest has come out of the Colombian markets. So far S&P have rejected suggestions that it is about to upgrade the country's BB rating (negative outlook). Note that were the agency to move in this direction (e.g. to BB+ with stable outlook) it would take the Colombia's position on the BradyNet ladder one rung higher, overhauling the Philippines. A mere outlook change though would leave Colombia's ladder position basically unchanged.

The World Average jumps from 61.84 to 61.92

The world average returns to 61.84

The world average remains unchanged at 61.85

The world average moved from 61.84 to 61.85

The world average stayed unchanged at 61.84

The world average stayed unchanged at 61.84

The MinFins have been trading up slowly all week indicating that this upgrade was widely expected. The Russian Eurobonds and PDI are slightly up in today's market.

The world average moved from 61.79 to 61.84

Despite the revised outlook by S&P, Turkey's sovereign bonds traded up across the board today. The Turkey '30 is trading at about 100 bps tighter than the Brazil '30. However, Turkey's medium term issues ('07 and '09) are trading at spreads of more than 100 bps wider than comparable Brazil sovereign issues.

The world average is 61.79