(Bloomberg) — A dispute brewing between President-elect Donald Trump and Panama over one of the world’s most important waterways has weakened the country’s assets.
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Panama bonds fell across the curve on Monday morning, the most in emerging markets, after Trump threatened to reassert US control of the Panama Canal if the country did not reduce transit fees. President Jose Raul Molino was quick to dismiss the threat, but the developing dispute has increased traders’ concerns about Panama’s future.
Bonds due in 2036 fell 0.7 cent on the dollar and the cost of sovereign default insurance jumped to the highest level since February on a closing basis amid thin trading, according to pricing compiled by Bloomberg.
The waterway, built by the U.S. Army Corps of Engineers more than a century ago, is one of the biggest sources of money for the government, which is already under pressure after a major copper mine suddenly closed last year. What’s more, it is teetering on the brink of losing its investment-grade credit rating after multiple downgrades recently.
“It’s extra attention that Panama doesn’t need right now,” said Natalie Marchek, managing director at HSBC Bank in New York.
Bonds were the worst bet among emerging market countries this quarter, losing 8.5% in that period, according to the Bloomberg index.
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