LONDON- Oman's bonds have dropped after a downgrade from Fitch on Monday night that has taken the sovereign close to high-yield territory.
Oman's 2027s are off around 0.33pt at 101.189, according to Tradeweb, and its 2047s are down 0.25pt at 99.581, after Fitch downgraded Oman to BBB- from BBB. The outlook is negative.
The ratings agency expects Oman's budget deficit to remain one of the biggest among Fitch-rated sovereigns at an expected 12.8 percent of GDP in 2017. Fitch estimates Oman's fiscal breakeven Brent oil price at around $83, well above the current level at around $65, according to Thomson Reuters data.
Trieu Pham, analyst at MUFG, expects follow through rating actions on Omani government-related entities, banks and corporates.
"We highlight that Oman and Omani GREs are the only GCC credits eligible for EMBI inclusion and think that further downgrade risk notably at Moody's (Baa2) and Fitch (BBB-) could result in forced selling," said Pham.
Oman is rated BB by S&P.
The sovereign has issued in conventional and sukuk format this year. It drew $16.7 billion of demand for its $5 billion offering of five, 10 and 30-year paper in March, and almost $7 billion of orders for a seven-year sukuk transaction in May.
(Reporting by Robert Hogg) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: firstname.lastname@example.org))