FILE PHOTO: The Pemex logo is seen at its headquarters in Mexico City, Mexico, April 20, 2020. REUTERS/Edgard Garrido/File Photo
“There is virtually no country on the planet that isn’t affected by this COVID crisis,” said partner and credit analyst at fund manager GMO, Carl Ross. “Overall credit quality is going to decline.” April’s downgrade of Mexico’s state oil firm Pemex alone saw nearly $60 billion worth of bonds, representing 6.6% of the EM investment grade market, lowered to speculative grade.
J.P. Morgan analysts reckon another $25 billion of Mexican corporate debt will follow Pemex into junk if the government loses its IG status. With airlines, tourism and manufacturing all reeling around the world, extrapolating the effect globally runs into hundreds of billions of dollars.