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Emerging markets

Emerging Markets: 5 key issues to watch in 2019

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.

  1. China-US – upside surprise…

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Panoramic Weekly: Stars and Strikes

Global bond markets reacted sharply to Wednesday’s release of US Services data, which struck its best mark in 21 years: US 10-year yields spiked to 3.2%, the highest since 2011, while the dollar reversed a gloomy September to recover its August level. The usually less reactive 30-year Treasury yields surged, leading some investors such as M&G fund manager Richard Woolnough to argue that the mar…

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Letter from Washington DC. The IMF’s Sovereign Debt Conference.

The IMF recently held a two-day public conference on sovereign debt at its home in Washington DC. How do we measure it? How have governments reduced it in the past, for example in the periods after the two World Wars? How can Japan carry debts of over 200% of GDP while other sovereigns have defaulted with virtually no public debt? And when things do go wrong, how do we sort out the mess of a re…

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Brazil’s election: What’s at stake?

Global investors are paying special attention to the forthcoming general election in Brazil, not only because the country is the world’s eighth-largest economy, ahead of Italy and Canada, but also because in these turbulent times for Emerging Markets (EMs), an unexpected or market-unfriendly outcome could bring more volatility to the entire asset class. After the recent sell-offs in Turkey and …

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Panoramic Weekly – EMs: How many one-offs to call it a crisis?

Global bond markets sank over the past five trading days, as what started being idiosyncratic problems in specific Emerging Markets (EMs) spread throughout the bond universe: only 14 of the 100 Fixed Income asset classes tracked by Panoramic Weekly posted positive total returns. The rest tumbled, mostly dragged down by the risk-off scenario (such as High Yield debt) or by exposure to rising rat…

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Turkish banks: this time it’s different?

Guest contributor – Elsa Dargent (M&G Financials Credit Research team)

Turkish banks have been subject to closer scrutiny over the past weeks as political events have triggered a confidence crisis with a run on the Lira (down by 38% year-to-date vs the dollar and by 26% since end-June, the banks’ last reporting date), a sizeable widening in Turkish govt yields, and an even sharper widening in b…

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EM HY - US HY spread

Emerging Market High Yield: is there value after the sell-off?

The ongoing financial meltdown in Turkey, increasing risks of more US sanctions on Russia and a repricing of China High Yield (HY) bonds – on the back of higher defaults and increased trade war tensions -, have all resulted in a significant widening of Emerging Market (EM) HY corporate credit spreads. Investors are now getting paid 525 basis points (bps) over US Treasuries for investing in EM “…

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Can Russia stomach new US sanctions?

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…

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