Weekly Credit Risk Monitor / Global

Weekly Credit Risk Monitor

  • We round up the week's key developments in the world of sovereign and corporate credit
  • In Focus: Interpipe – Mixed Q1 20 and a bumpy road ahead
  • Also in the news: South Africa emergency budget, IMF slashes economic outlook, Angola debt moratorium and more

In Focus: Interpipe – Mixed Q1 20 and a bumpy road ahead

Read the full report here

Recap of the week’s key credit developments 

Global growth update: The IMF’s June update to its World Economic Outlook (WEO) published yesterday (24 June) shows a deeper-than-expected recession this year for the world economy, but still envisages a V-shaped recovery, albeit one that is slightly softer than seen before. The downgrade in global growth this year is borne almost evenly between Advanced Economies and Emerging Markets, although Emerging Markets are seen enjoying a less vigorous, but still strong, bounce-back next year. Global growth is now projected to be -4.9% this year, 1.9ppts below the April WEO forecast. This update comes as the coronavirus pandemic and containment measures have had a more negative impact on growth in H1 20 than previously thought.

Oman (OMAN): On Tuesday, Moody’s downgraded Oman’s long-term foreign currency rating to Ba3 from Ba2 after a review period. The outlook is also negative. Moody’s cited the lower oil price environment, which it now expects to persist into the medium term.

Benin (BENIN): On Friday, S&P affirmed its B+ long term foreign currency rating on Benin, which has been in place since July 2018. The outlook is stable.

Angola (ANGOL): China was reported earlier this week to have agreed to grant Angola a three-year moratorium on debt service payments, according to Angola local media, although the reports have yet to be confirmed. The reports stated that a final deal has yet to be signed. Reports state that Angola’s debt to China is US$21.7bn, with US$14.6bn owed to the China Development Bank, US$4.7bn owed to China Exim Bank, and US$2.4bn owed to Bank of China.  

Zambia (ZAMBIN): The IMF began a virtual mission with Zambian authorities on 22 June. The consultative and information exchange mission is due to conclude on 1 July. It is not a programme negotiating mission however, although Bloomberg reported on Wednesday the authorities saying that the IMF Board had granted a mandate to discuss a programme. This has yet to be confirmed by the IMF. Separately, a group of bondholders issued a press release stating that they had formed a creditor committee to negotiate with the government. The committee consists of 10 funds based in the US and Europe and holds about 35% of Zambia’s eurobonds. The committee is also in touch with holders representing a further 30% of Zambia’s eurobonds.

South Africa (SOAF): South Africa’s Finance Minister Tito Mboweni delivered the country’s first-ever emergency budget via video stream to a mostly empty parliamentary chamber on Wednesday. Necessary reforms will be delayed until October’s MTBPS, wasting an opportunity to implement tough reforms. Markets have taken the news in stride, but we believe inaction portends an ongoing slide in debt dynamics moving forward. See our recent report here.

Global policy response:

  • Russia: On Friday, the Central Bank of Russia (CBR) cut its key rate by 100bps to 4.5%. This was the third cut this year, after a 25bps cut on 7 February and 50bps cut on 24 April. See our research provider Alfa’s report here.

  • Azerbaijan: Also on Friday, the Central Bank of the Republic of Azerbaijan (CBA) Board cut its refinancing rate by 25bps to 7%, following a previous 25bps cut on 31 January.

  • Belarus: On Monday, the National Bank of the Republic of Belarus cut its refinancing rate by 25bps to 7.75% in an unscheduled meeting. This was the third cut in 2020, after 25bps on 12 February and 75bps on 13 May.

  • Paraguay: On Monday, Banco Central del Paraguay also cut its policy interest rate by 50bps to 0.75%. This was the fifth cut this year, bringing total 2020 rate cuts to 325bps.

  • Hungary: On Tuesday, the Central Bank of Hungary’s Monetary Council lowered the base rate by 15bps to 0.75%, in the first rate change since May 2016, to stimulate the economy.

  • Georgia: The National Bank of Georgia cut its refinancing rate on Wednesday by 25bps to 8.25%.

  • Philippines: On Thursday, Bangko Sentral ng Philipinas surprised with a 50bps cut to its key policy rate taking it to 2.25%. This was the fourth rate cut this year, bringing total cuts in 2020 to 175bps. The rate is now at a record-low as the Monetary Board responds to slowing domestic and global economic activity.

New issuance:

  • Trinidad and Tobago: On Monday, Trinidad and Tobago (Ba1/BBB-/-) priced a US$500mn bond with a 4.5% coupon and maturity on 26 June 2030 at par.

  • Uruguay: On Thursday, Uruguay (Baa2/BBB/BBB-) priced a dual-tranche bond offering.

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Macro Analysis / Global

The Commodities Feed: OPEC+ JMMC set to meet

ING Think
13 July 2020


The market continues to trade in a fairly boring range, with ICE Brent continuing to trade around the US$43/bbl level. On Friday, the IEA released its monthly oil market report, and whilst the agency revised higher its demand estimates for this year, risks to the demand outlook were highlighted with the surge in Covid-19 cases that we have seen, particularly in the US. The IEA expects oil consumption this year to decline by 7.9MMbbls/d, compared to their previous estimate of a fall of 8.1Mbbls/d. This slight revision reflects demand that we have already seen, rather than a change to the outlook over the second half of the year.

There were reports over the weekend that OPEC+ will start to ease their production cuts from the 1 August, which is in line with the current deal. This would see the group reduce the scale of cuts from 9.6MMbbls/d to 7.7MMbbls/d. The market should get confirmation of this over the course of the week, with the OPEC+ Joint Ministerial Monitoring Committee (JMMC) set to meet on Wednesday to discuss the performance of the deal so far, and potentially what further action is needed by the group. If the group decide to ease cuts from the 1 August, this should not lead to a change in views on the market, with most assuming that OPEC+ would start easing cuts by this stage already. However continuing deeper cuts would be more of a surprise.

There is a fair amount of other data set to be released this week. Later today the EIA will be releasing its US drilling productivity report. This will be followed by Chinese trade data on Tuesday, and finally, OPEC will release its monthly market report on the same day as well, which will provide OPEC production numbers for June, along with the group’s outlook for the oil market.

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