(Bloomberg) — An unfolding dispute between President-elect Donald Trump and Panama over one of the world's most important waterways is trimming the nation'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 nation did not cut shipping fees. President José Raúl Mulino was quick to reverse the threat, but the developing spat added to traders' concerns about Panama's prospects.
Notes due 2036 fell 0.7 percent on the dollar and the cost of insuring against a sovereign default jumped to the highest level since February on a closing basis amid thin trading, according to prices compiled by Bloomberg.
The waterway, built by the US Army Corps of Engineers over a century ago, is one of the biggest sources of money for the government, which is already under pressure after a key copper mine suddenly closed last year. What's more, it is on the verge of losing its investment grade credit rating following multiple recent downgrades.
“It's additional coverage that Panama doesn't need right now,” said Nathalie Marshik, managing director at HSBC in New York.
Bonds have been the worst bet among emerging market countries this quarter, losing 8.5% in that period, according to the Bloomberg index.
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