Senior Portfolio Manager Anthony Kettle’s weekly BlueBay Emerging Market Debt commentary offers readers a concise yet wide-ranging macro overview. Kettle covers markets large and small, providing insight on how financial, political, and economic developments in one region affect markets elsewhere. Here is his latest insight.
Summary
Risk markets staged a partial recovery this week, with the S&P 500 up +0.5% while the Euro Stoxx 50 and emerging-market (EM) equities gained +0.4% and +1.1%, respectively. The US rates curve was 7 basis points (bps) lower in the 10-year point with a near parallel shift in the curve, while the German bund curve was 11bps lower in the 10-year part. Meanwhile, US real yields moved 8bps lower in the 10-year point, to end the week at 1.92%.
In EM credit markets, spreads were 4bps wider and 3bps wider in both corporates and sovereigns while total returns were up +0.3% in both cases. In EM corporates, outperformance came from the oil and gas sector, while the financials and real estate sectors lagged. In the sovereign space, Venezuela recovered and outperformed on the back of the license extension news for Chevron, and Brazil and Mexico also performed well. Argentina and parts of Sub-Saharan Africa were laggards over the week.
In EM local markets, total returns were down -0.5%, with foreign exchange (FX) the main driver of the weakness. Regionally, it was Latin America that was under
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