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UPDATE 2-Fears of political vacuum weigh on Peru bonds

(Updates bond pricing)

LONDON, Nov 16 (Reuters) - Peru’s sovereign dollar bonds turned lower on Monday as investors worried about the risk of further political unrest, after lawmakers failed to name a successor to departed interim president Manuel Merino.

Reversing earlier gains, the November 2050 issue sank 0.9 cents to 158.44 cents on the dollar, while the March 2037 issue was 0.6 cents weaker, Refinitiv data showed.

Merino took office last week after President Martin Vizcarra was impeached and removed from power. Merino resigned on Sunday following lawmakers’ demands he step down over two deaths during protests at the sudden ouster of his predecessor.

Moves to choose a new president suffered a setback after lawmakers failed in a midnight vote to select the only name then put forward, Rocío Silva-Santisteban, a leftist human rights defender.

“Political uncertainty will persist into the April general elections, but the strong fundamentals vs other Latam peers and the prospects of a global economic recovery should limit the downside,” said Trieu Pham, emerging market sovereign debt strategist at ING.

The political turmoil is confronting the world’s No. 2 copper producer during what is expected to be its worst economic contraction in a century because of the COVID-19 pandemic.

Peru’s Eurobonds have been on a wild ride. They fell early last week after Congress ousted Vizcarra, before rallying after his successor Merino called for calm. (Additional reporting by Karin Strohecker; Editing by Marc Jones, Barbara Lewis and Peter Graff)

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