Fitch Upgrades Dominican Republic’s Credit Rating

[Dolores]

Fitch Ratings, a leading global rating agency, has reaffirmed the Dominican Republic’s long-term foreign-currency issuer default rating at ‘BB-‘ with a positive outlook, the Dominican Presidency reports. This upgrade reflects the country’s robust economic growth, improved governance indicators, and potential for further reforms to strengthen its macroeconomic framework.

According to Fitch, the Dominican Republic’s rating is supported by a history of robust economic growth, a diversified export structure, a high per capita gross domestic product (GDP), and favorable governance outcomes, which compare favorably to other countries in the region.

The rating agency also highlighted the recently approved Fiscal Responsibility Law, which establishes a fiscal rule limiting real government spending growth to 3% (7% in nominal terms) and anchors debt at 40% of GDP by 2035. This...

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[chico bill]

That good be the kiss of death.

 

[playacaribe2]

Since the Fitch rating was BB- with a positive outlook in November of 2023, how it can now be considered an upgrade is government fiction at its best. A reaffirmation of that upgrade from 2023, yes……but an upgrade…..no.

The debt is still classified as “junk” and will remain so until they can get to a BBB rating and investment grade status…….and that is likely many years, if ever, into the future.

However, the world’s money managers will start to take notice if they can attain a bb+ credit rating.

Respectfully,
Playacaribe2

 

[chico bill]

Since the Fitch rating was BB- with a positive outlook in November of 2023, how it can now be considered an upgrade is government fiction at its best. A reaffirmation of that upgrade from 2023, yes……but an upgrade…..no.

The debt is still classified as “junk” and will remain so until they can get to a BBB rating and investment grade status…….and that is likely many years, if ever, into the future.

However, the world’s money managers will start to take notice if they can attain a bb+ credit rating.

Respectfully,
Playacaribe2

No one but higher risk takers invest in bonds from BBB- governments and only because they have to carry a very high premium.
If you search on your brokerage websites BBB- is the lowest before being tagged as speculative investment

 

[playacaribe2]

No one but higher risk takers invest in bonds from BBB- governments and only because they have to carry a very high premium.
If you search on your brokerage websites BBB- is the lowest before being tagged as speculative investment

There are more than a few junk bond funds likely holding sovereign debt of the DR along with bonds of other nations in the “junk” category. It is of course risky, but the yields are much higher than investment grade bonds of other nations.

Respectfully,
Playacaribe2

 

[johne]

There are more than a few junk bond funds likely holding sovereign debt of the DR along with bonds of other nations in the “junk” category. It is of course risky, but the yields are much higher than investment grade bonds of other nations.

Respectfully,
Playacaribe2

what is the average yield and who is the taker...may I ask? (The fund?). Thanks

 

[playacaribe2]

what is the average yield and who is the taker...may I ask? (The fund?). Thanks

You would be hard pressed to find an emerging market bond fund that did not hold sovereign debt of the DR.

Fidelity, JPMorgan, Goldman, PIMCO etc. Yields are all in the 5% category.....


Respectfully,
Playacaribe2

 

[johne]

You would be hard pressed to find an emerging market bond fund that did not hold sovereign debt of the DR.

Fidelity, JPMorgan, Goldman, PIMCO etc. Yields are all in the 5% category.....


Respectfully,
Playacaribe2

you could have made 10 per cent in the past year on the DOP going from 55 to 60. Lol.

 

[playacaribe2]

you could have made 10 per cent in the past year on the DOP going from 55 to 60. Lol.

I believe it was officially about 6%, but your point is well taken. Bonds, any bonds including the Dominican variety, get crushed in a declining interest rate environment. Adding to that is the current strength of the USD, not just against the peso, but the yen, pound, loonie, euro, etc.

At the moment, there are far better places to invest than in Dominican bonds, or in the alternative, you can do nothing and get the average annual depreciation rate of the peso to the dollar which usually runs at 4%.

Respectfully,
Playacaribe2

 

[Manuel01]

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hmmmm Didn't Fitch released a statement in summer 2008 that "The US Economy and the Housing Market are stable" !?

 

[reilleyp]

I believe it was officially about 6%, but your point is well taken. Bonds, any bonds including the Dominican variety, get crushed in a declining interest rate environment. Adding to that is the current strength of the USD, not just against the peso, but the yen, pound, loonie, euro, etc.

At the moment, there are far better places to invest than in Dominican bonds, or in the alternative, you can do nothing and get the average annual depreciation rate of the peso to the dollar which usually runs at 4%.

Respectfully,
Playacaribe2

Playa I think you meant to say a declining currency environment , not interest rates. When interest rates go down, bond prices go up. The only exception would be a severe crash or depression when the bonds are deemed nearly worthless.

 

[playacaribe2]

Playa I think you meant to say a declining currency environment , not interest rates. When interest rates go down, bond prices go up. The only exception would be a severe crash or depression when the bonds are deemed nearly worthless.

Yes, perhaps I was not clear enough. What I should have said is that floating bond yields get crushed in a declining interest rate environment. However, and to your point, bond prices themselves tend to rise.

So if your investment goal is current monthly income by buying floating bonds with a certain yield, that yield tends to fall as the price of the bond goes up.....reacting of course to a countries Central Banks lowering of interest rates and other geo-political risks..

On the other hand, fixed rate bonds tend to yield the same amount monthly/quarterly etc., but the value of those bonds are constantly in flux, affected also by Central Banks and other geo-political risks.

In a nutshell, bond prices and interest rates have an inverse relationship, meaning that when interest rates rise, bond prices fall, and vice versa. This is because a bond's yield is calculated by dividing its annual coupon payment by its price, so when the price changes, the yield changes in the opposite direction.

Respectfully,
Playacaribe2