March 9 (Reuters) - Moody’s Investors Service downgraded Venezuela’s sovereign rating further into junk territory on Friday, on expectation that the continuing erosion of the country’s payment capacity will lead to heavy losses to bondholders.

The debt rating agency raised its outlook on the country to stable from negative. It downgraded Venezuela’s foreign currency and local currency issuer ratings to C from Caa3.

“The prospects for Venezuela’s oil sector are likely to mirror the country’s worsening financial situation,” Moody’s said in a statement. (Reporting by Nishara Karuvalli Pathikkal in Bengaluru; Editing by Shounak Dasgupta)