Pessimism about Brazil deepened this week after Standard & Poor’s downgraded both the sovereign and Petrobras to junk status, reigniting fears of forced selling in a country sinking fast into high-yield territory.
The other agencies are expected to follow suit soon, further clouding the picture for Brazil, which is undergoing its worst economic crisis in decades.
Analysts now expect Moody’s to drop the outlook on its Baa3 Brazil rating to negative and then downgrade the sovereign to Ba1 early next year.
The more conservative Fitch still rates Brazil at BBB, but is expected to downgrade it this year to BBB-, with a negative outlook.
JP Morgan estimated last month that Brazil’s full downgrade to junk would result in about US$6.2bn in forced selling among investors who hold US$32.2bn of hard-currency sovereign bonds.
That doesn’t include the up to US$14bn of outflows likely to occur among Brazilian corporate debt holders, the bank said.
Brazil Energy Insight 
Leave a comment