Investors of six of the world’s largest fund managers holding bonds of Mexican oil company, Pemex, had been expecting a downgrade to “junk” status within a six-month timeframe, which would ultimately prompt a massive sell-off of the company bonds and hit Mexican economy as well amid a steamed up trade relation with United States over illegal immigrant issue.
On Thursday, the 6th of June, rating agency, Moody’s downgraded its outlook for the Mexican state-controlled oil company to “negative” from “stable”, a day after it had taken identical action to Mexico’s sovereign debts.
Aside from Moody, rating agency Fitch had also forged another blow to Latin America’s second largest economy with a downgrade, citing trade tensions with United States a critical risk to Mexican economy. Followed by Thursday’s (June 6th) downgrading of Pemex bonds, a global co-head of emerging market debt at Neuberger Berman, Gorky Urquieta said, “The action moves the needle on Pemex losing its investment grade rating closer,” while Moody’s said following its downgrading of Pemex bonds that it had concerns over the oil company’s credit strength and it had been in dire need of capital investment which seemed to be a distant dream for the moment being.
Citing Fitch’s rating of Pemex to “BBB-“ as a critical juncture which could pave the way for further downside break given Trump’s Mexico tariff hike, an emerging markets portfolio Manager at Amundi , Abbas Ameli-Renani said, “The downgrade of the sovereign by Fitch will exert downward pressure on Pemex’s rating”.