Emerging Markets (EM) debt had a torrid 2018 as global macro risks (including general geopolitics and trade wars), softer EM growth and idiosyncratic stories (Argentina, Turkey), all repriced relatively expensive valuations at the beginning of the year. Are the new prices a better reflection of fundamentals? This will largely depend on the evolution of 5 key topics.
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- China-US – upside surprise…
After the summer break, the US Congress is scheduled to review various bills proposing additional sanctions on Russia. The proposals include additional restrictions on Russian imports and exports to the US, as well as on activities of Russian banks in the country. Under consideration there will also be a ban, for US citizens, to trade any newly-issued Russian sovereign debt with a maturity of m… Read the article
Renewed political tensions between the US and Turkey and Russia increased uncertainty and led to a currency sell-off in both countries. Traditional safe-haven assets, such as US Treasuries and the yen, rose. Are these crises telling us anything about the state of the global economy?
What is happening and why?
The Turkish lira and the Russian ruble plunged recently, following an escalation of di… Read the article
Bahrain spreads have widened in recent months, despite the rise in oil prices. The market is focusing on the $750 million Bahrain Sukuk maturing on November 22, 2018. Given that the country’s international reserves are estimated at around $2.1 billion, the country will need additional funding to repay it. The market consensus is that Bahrain will receive financial support from neighbouring Sau… Read the article
Persistent structural weaknesses, imbalances, and financial fragilities. These were some of the ways in which the International Monetary Fund (IMF) described the Italian economy in its most recent country report. Almost a decade after the great financial crisis, Italy’s economic prospects remain dim, with the costs borne disproportionately by the working age and younger population. With no gove… Read the article
As the U.S. yield curve flattened to just 45 bps (2s-10s) last week, we dug out something I wrote back in 2007, in the early days of this blog. A chart that accompanied the blog showed that a) U.S. BBB credit spreads had hit their tightest level for nearly 3 decades and b) that the yield curve had flattened substantially (and in fact inverted). If you pushed the yield curve shape chart 18 mon… Read the article
In its 2016 Annual Report entitled ‘making tomorrow a better place’, Carillion claimed they had ‘a good platform from which to develop the business in 2017’. Less than ten months after publication, Carillion went into compulsory liquidation, bypassing administration and the chance to continue trading. Assets will be realised and distributed to creditors, leaving little or no value remaining. Bu… Read the article
First of all, our thoughts are with those impacted by Hurricane Irma and other recent weather-related disasters.
Beyond the human tragedy and economic costs, these are typically low-probability, but potentially high-impact, events that can ultimately impact an issuer’s ability to service its debt obligations. As bond investors, we aim to assess the various risk factors related to the companies … Read the article
Another month has drawn to an end, which presents a good opportunity to take stock and review recent events and Bloomberg’s surprise monitors – true to their name – have provided some unexpected results in August. Read the article
Though the recent US Treasury report did not name any country as a currency manipulator (see more details on this in Mario’s blog), the monitoring list centres on larger economies that meet the following criteria:
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- The country has a significant bilateral trade surplus with the United States defined as more than USD 20 billion.
- The country has a current account surplus of at least 3% of GDP and …