Senegal’s Dollar Bonds Drop After S&P and Moody’s Downgrades
TLDR
- Senegal’s dollar bonds fell on Monday after S&P Global Ratings, citing weaker public finances
- Bonds maturing in 2031 lost 0.3% to 87.44 cents on the dollar, and securities due in 2048 fell 0.2% to 67.17 cents
- Last week, Moody’s also downgraded Senegal’s long-term rating by two notches to B3
Senegal’s dollar bonds fell on Monday after S&P Global Ratings, citing weaker public finances. S&P lowered Senegal’s sovereign ratings to 'B' from 'B+' on February 28, following an audit that restated the country's fiscal position, revealing a much higher debt-to-GDP ratio. Bonds maturing in 2031 lost 0.3% to 87.44 cents on the dollar, and securities due in 2048 fell 0.2% to 67.17 cents.
The downgrade follows an investigation into Senegal's finances, with the Court of Auditors revealing a revised debt-to-GDP ratio of 106% for 2024, compared to the previous estimate of 77%. This audit highlighted unreported investments funded through external loans and domestic bank debt, resulting in a more constrained fiscal position.
Last week, Moody’s also downgraded Senegal’s long-term rating by two notches to B3, citing a significantly higher debt burden and governance deficiencies. The country’s bonds have underperformed in emerging markets this month, with securities maturing in 2048 losing 0.7% to 68.94 cents on the dollar.
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Key Takeaways
Senegal’s downgraded ratings reflect growing investor concerns over the country’s fiscal health and governance issues. The country’s revised fiscal metrics reveal a deteriorating financial position, with debt rising faster than expected, signaling potential challenges in managing future debt servicing. The downgrade also reflects the risks tied to fiscal consolidation and financing plans. While S&P and Moody’s have issued stable outlooks, the country’s ability to address its fiscal challenges, especially with reduced access to market funding, could further affect investor sentiment. If fiscal deficits widen or debt repayment becomes more strained, further rating cuts remain a risk.
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