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emerging markets

Commodity carnage and mayhEM – how exposed are High Yield markets?

We have seen a fairly swift and deep sell off in both commodities and emerging market equities over the past few months. The recent moves are now feeding through into a more broad-based sell off in risk assets. It appears an opportune time to take stock and see how exposed the various high yield markets are to these trends.

In order to assess any impact, I will firstly consider direct exposure,…

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Covenant case study – after the good, the bad

We recently highlighted a bond covenant that benefited fixed income investors. After the good, this week we have seen the bad. In this case, a bond covenant may impact bondholders in a detrimental way. Both examples are evidence of how critical it is to have a thorough understanding of bond documentation ahead of investing in a bond.

Kuwait’s third largest bank, Burgan Bank, announced in a regu…

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Will the thawing in US-Cuban relations bring havoc to the region’s bonds?

It is August and I should be enjoying a beach holiday, rather than being stuck in London under temperamental weather. To mitigate my despair, I decided to write some blogs on the topic of tourism. Given the ongoing normalisation of US-Cuba relations, I have been looking at the impact that this unprecedented shift in policy could have on the region. Although the embargo and travel restrictions r…

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A message to Brazilian tourists: stop travelling abroad and help your country

S&P placed Brazil’s foreign currency ratings (BBB-) on negative outlook yesterday, only one small step away from junk. S&P’s negative outlook implies that there is a probability higher than 33% that Brazil’s rating will be subject to a downward revision in the next 18 months. According to the statement, S&P “could lower the ratings if there were further deterioration in Brazil’s external and fi…

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Sorting the micro from the macro in Emerging Markets

While generating a lot of concerns, one of the benefits of the strong growth of the emerging market (EM) corporate bond universe in the past decade has been the diversification of issuers. The asset class, which at $1.6 trillion is now larger than the US high-yield market, offers a vast number of countries and industries to invest in. Contrary to the EM rhetoric that has been making headlines i…

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The Middle-East – an expensive safe haven for bond investors

I am just back from a fascinating investor trip to the Middle-East, where I spent a week meeting with corporate and government bond issuers as well as market participants in the United Arab Emirates (UAE). We spoke at length about Islamic finance, the oil price impact and geopolitical risk.

When I asked the question of the oil price impact on the region to corporate issuers and government offic…

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The falling US unemployment rate could benefit some emerging markets

The declining unemployment rate in the US has renewed the debate on the timing and pace of monetary tightening by the Fed. While wage pressures have been muted thus far, the risk is rising that further declines of unemployment will lower the rate below non-inflationary (NAIRU) levels and prompt the Fed to start hiking.

For emerging markets, one of the main transmission mechanisms is through wea…

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Emerging market fixed income – 2014 performance

Emerging Market debt: 2014 returns post-mortem and 2015 outlook

2014 was quite an eventful year for Emerging market (EM) fixed income. After a period of strong performance which lasted all the way to September, markets corrected significantly in the latter part of the year as the escalation of the Russia crisis and the plunging oil prices triggered the most significant drawdown since the “taper tantrum” of June 2013. All in all, emerging markets still poste…

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EM Asia corporate bonds have outperformed in recent sell-off

After the December rout, where is the value in EM corporates?

It’s this time of the year when banks and other investment research providers have released their outlooks for the coming year. For the EM corporate bond asset class, Asia was forecast to be the best performer in 2015, with most top picks being in India and China.

Most 2015 outlooks were released in late November or early December, when EM USD corporate bonds were boasting a solid 6.1% total re…

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Corporate bond spreads

EM corporate bonds: spreads are attractive compared to developed markets

Emerging market (“EM”) corporate bonds are a fast-growing segment of the fixed income market. The hard-currency (USD, EUR, GBP and CHF) EM bond market has doubled in size since 2010 and is now worth over $1.3 trillion – which makes it as big as the US high-yield market. Including local-currency bonds, the Bank of International Settlements estimated that the EM corporate bond market was worth ne…

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