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Bond Market News
Panama’s Dollar Bonds Hold Steady Amid Downgrade Risks
March 24, 2025
Panama is said to be at risk of losing its investment-grade credit rating due to budget struggles and a dispute with Donald Trump over the Panama Canal. It is currently rated Baa3/BBB-/BB+ with a negative outlook by both Moody’s and S&P. However, its dollar bonds have defied expectations and delivered a 6.7% return YTD, outperforming EM peers, according to Bloomberg. President Jose Raul Mulino has boosted investor confidence by reforming social security, negotiating to reopen a key copper mine, and facilitating the sale of canal ports to a BlackRock-led group, easing US concerns about Chinese influence. These actions, coupled with last year’s bond selloff, are said to have made Panama’s debt appear undervalued, fueling a rally in its bonds. Despite the optimism, strategists from Barclays and BancTrust warn that fiscal challenges remain. The pension reform lacks long-term funding solutions, and Panama’s deficit is expected to exceed targets.
Panama’s dollar bonds traded stable with its 7.125% 2026s at 101.87, yielding 4.83%
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