Quarterly EM Debt Update | 2Q 2017

Emerging Debt Valuation Update: 2Q17

Executive Summary

  • Emerging currency valuations continue to look attractive according to our methodology, especially relative to the USD. Relative valuation of EM currencies worsened slightly against the USD, and improved against the EUR during the second quarter.
  • Local debt markets also look attractive, based on real yield differentials between EM and developed market bonds. Differentials remain well above historical norms, even though the differential has fallen slightly over the past quarter.
  • External debt remained in ‘‘rich’’ territory in the second quarter 2017, but the broad stabilization in credit ratings and credit spreads during the quarter meant that the asset class maintained its valuation metrics (it did not get richer).

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Disclaimer: The views expressed are the views and understanding of Carl Ross through the period ending July 18, 2017 and are subject to change at any time based on market and other conditions. While all reasonable effort has been taken to insure accuracy, no representation or warranty for accuracy is provided nor should be assumed. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.