Some of the riskier emerging market sovereign bonds look attractive and have room for upside, mainly because of interest rate cuts in major global economies, the report explained.
Argentine bonds, which have gained ground in recent weeks, among other things due to the expectation generated by the change of government, are being recommended by international banks, along with “junk” or low-rated debt from other emerging markets.
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Morgan Stanley says Ghana’s bonds due 2035, Ukraine’s 2026, Zambia’s 2024, El Salvador’s 2041 and Argentina’s 2041 are the “right bonds” to choose.
“Portfolio allocation should shift from investment grade to high yield bonds, supported by both valuations and positioning. Nearly all of the value resides in the ‘Simple B and below’ rating space,” noted the strategists led by simon waever in a note dated June 16 in connection with lower ratings on emerging market securities.
Price rallies are already underway in riskier parts of emerging markets, as junk-rated dollar government bonds, from El Salvador to Nigeria to Turkey, have outperformed this month.. Argentine bonds are also found in this package.
“Even Argentina, a serial defaulter, has seen its dollar bonds advance in June, as investors prepare for the upcoming presidential election. President Alberto Fernandez He has ruled out running for re-election, with inflation above 100% and public coffers depleted, which opens the door to a new administration with market-friendly priorities”, wrote the international agency Bloomberg.
Emerging market high-yield debt is up almost 3% so far this month, with the biggest gains coming from the highly speculative CCC-rated countries – including Argentina.
Source: Ambito
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