Alessandro #IoMiVaccino 🇮🇹🇪🇺🇺🇸🇮🇱 · @pelias01
31st Jul 2015 from TwitLonger
Emerging markets continued to outperform
The external environment for Emerging Market credit remains challenging. Specifically, the protracted weakness in commodities, with several metal prices touching new multi-year lows this week, has weighed on market sentiment for commodity-related credits and, given the importance of the latter in EM indices, on EM credit markets in general.
Moreover, idiosyncratic developments in key EM credit markets have not been favourable either. S&P changed the outlook on Brazil's sovereign BBB- rating to negative from stable.
Barclays assumes that, unless there is a meaningful shift in the relationship between government and Congress, Brazil is at risk of losing its IG status over the next year (see Brazil: Implications of S&P's outlook change on Brazilian assets, 29 July 2015, for a discussion of the potential consequences of Brazil losing IG status from a sovereign, corporate and local markets perspective).
In Turkey, the political impasse continues, with the likelihood of snap elections increasing steadily at a time when shifts in security policy have raised geopolitical concerns and put into question any prospects of a resumption of the Kurdish peace process.
Reflecting the factors above, the Barclays USD EM Aggregate index widened by c.15bp this week. Remarkably, however, EM has continued to outperform DM credit.
Source: FxWire Pro - Commentary