Investment strategy Correspondent
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Jun 23, 2014

Sberbank back to bond markets, Russian assets gain

LONDON, June 23 (Reuters) – Sberbank returned to global bond
markets on Monday, the first Russian state-run firm to do so
since February, while the rouble and stocks led gains on
European emerging markets thanks to strong Chinese economic

Markets broadly shrugged off the oil price surge caused by a
spreading insurgency in Iraq after a preliminary HSBC survey
showed activity in China’s factory sector expanded in June for
the first time in six months as new orders surged.

Jun 20, 2014

Ukraine bonds recover; emerging stocks head for weekly loss

LONDON, June 20 (Reuters) – Ukrainian bonds rose slightly on
Friday, recovering from panic over possible debt restructuring
though most emerging assets weakened against the backdrop of
violence in oil exporter Iraq and a rise in U.S. bond yields.

Emerging stocks were set to snap two weeks of gains, falling
0.3 percent on the day despite record highs on the
world equity index, and most currencies slipped, with energy
importers facing the prospect of significantly higher oil

Jun 13, 2014

ECB triggers explosive rise in emerging market euro borrowing

LONDON, June 13 (Reuters) – Emerging market bond sellers and
European funds are both revelling in an explosive rise in euro
debt sales that offer cheap cash to borrowers while providing
investors with higher yields than anywhere in the euro zone.

Borrowers had already turned to the euro market in recent
months as expectation of policy easing by the European Central
Bank cut borrowing costs and weakened the euro.

Jun 10, 2014
via Global Investing

Anticipating the fallout from South Africa’s ratings reviews

South Africa is due ratings reviews this Friday. Chances are that the Standard & Poor’s agency will cut its BBB rating by one, or possibly even two notches.  Another agency Fitch has a stable outlook on the rating but could still choose to downgrade the rating rather than the outlook. What will be the damage?

There is undoubtedly a link between ratings and bond prices.  So a one-notch ratings downgrade tends to lead to roughly a 20 percent increase in bond yield spreads and credit default swaps (instruments that are used to hedge against default), according to calculations by JPMorgan. But in South Africa the lower credit rating may already be already reflected in asset prices — Panama, Brazil, Colombia, Philippines, Uruguay, Indonesia, and Romania carry lower sovereign credit ratings but boast lower CDS and dollar bond yield premia over Treasuries.  Russia and Turkey have lower average ratings than South Africa but their debt and CDS spreads  are roughly on the same level.

Jun 10, 2014

Emerging stocks at 1-yr high; rand falls on growth fears

LONDON, June 10 (Reuters) – The South African rand fell 0.7
percent on Tuesday versus the dollar, lagging emerging peers as
a stubborn economic downturn looks set to deepen while broader
emerging equities extended gains to one-year highs.

Emerging markets worldwide have been buoyed by signs of
economic recovery in China and United States, as well as euro
zone monetary easing, while bond investors are betting that
developing countries especially in eastern Europe would follow
the ECB in cutting interest rates.

Jun 9, 2014

ECB propels emerging assets to multi-month highs

LONDON, June 9 (Reuters) – Emerging local currency bond
yields fell to multi-month lows on Monday after the euro zone’s
extraordinary monetary easing pushed cash into high-yield assets
and boosted expectations of rate cuts in the developing world.

Bulls also received impetus from signs of global economic
recovery after robust U.S. jobs data and a pick-up in Chinese
exports. They have, for the time being, shrugged off U.S.
10-year yields at one-month highs above 2.61 percent and are
betting a U.S. rate rise is quite some way off.

Jun 4, 2014

U.S. yields set to spoil ECB easing party for emerging markets

LONDON (Reuters) – Emerging market bulls who had reckoned on a boost from euro zone policy easing are instead facing an incipient rise in U.S. bond yields that threatens to wipe out any support from the ECB.

The European Central Bank is expected to drive one of its main interest rates into negative territory and boost liquidity on Thursday as it grapples with the threat of deflation and a stubborn economic funk in the euro zone. If that doesn’t work, it may even pump in billions of euros via bond-buying, an option almost unthinkable a year ago.

Jun 3, 2014

Emerging investors watch ECB, US Treasuries; dollar debt spreads at 15-mth lows;

LONDON, June 3 (Reuters) – Emerging sovereign dollar bonds
traded at the lowest yield premia to U.S. Treasuries since
February 2013 on Tuesday, while inflation optimism helped India
and Turkey outperform in local currency debt markets.

Most emerging assets were rangebound, however, taking off
the Chinese government’s recent stimulus announcements and
better economic data in stride. Instead, focus was on U.S.
Treasury yields, which rose above 2.5 percent for the first time
in a week.

Jun 2, 2014

Russian bond markets in deep freeze as banks stay out

LONDON, June 2 (Reuters) – Banks fearful of wide-ranging
Iran-style U.S. sanctions in retaliation for Moscow’s actions in
Ukraine are slashing their inventories of Russian assets to the
minimum, effectively freezing up the trade in its bonds.

In the short-term, that is an inconvenience for the funds
that may be seeking to dip back into Russian bonds after a huge
sell-off in March and April. But if the drought persists it
could threaten the ability of Russian borrowers to raise money
by issuing new securities in primary markets.

May 29, 2014

Bondholders reject Kazakh Alliance Bank’s debt restructuring offer

LONDON, May 29 (Reuters) – Kazakhstan’s Alliance Bank,
majority owned by the country’s sovereign wealth fund, said on
Thursday that talks with creditors had broken down on what would
be its second debt restructuring in four years.

The bank defaulted on debt in the aftermath of the global
financial crisis and restructured debt in 2010 but late last
year said it needed to recapitalise to restore profitability.