20170710-法国巴黎银行-CEEMEA_sovereign_credit_navigator_22页_387kb

CEEMEA Sovereign Credit Navigator Summary – 10 July 2017

Core Content

The CEEMEA sovereign credit market remains under pressure due to the continued rise in EUR and USD interest rates. The report emphasizes that the current rate drawdown is approaching the "pain threshold," beyond which historical losses have accelerated. As a result, the strategy remains defensive, with a recommendation to buy CDS protection, especially as the potential for a Fed unwind announcement looms.

Main Points

• CDS Basis and Credit Risk:

  • The Turkey 5y CDS basis is noted to be cheap and is recommended for purchase.
  • The CDS basis for both Turkey and South Africa is near three-month lows, suggesting that investors may favor buying CDS protection if the risk-off tone continues.
  • In South Africa, the 5s-10s has reached three-month highs, while the 10s-30s has reached three-month lows, indicating underperformance in the 10y segment of the curve.
  • The cheapest bonds on the South Africa curve, based on RV (relative value) basis, are the '25s, '26s, and '28s.

• Rating Reviews (14 July):

  • Croatia: BB (Fitch), Ba2 (Moody's)
  • Ethiopia: B1 (Moody's)
  • Latvia: A3 (Moody's)
  • Namibia: Baa3 Neg (Moody's)
  • Romania: BBB- (Fitch)

• Sovereign Credit Performance (Last Week):

  • CEEMEA sovereign credit ended the week 16bp wider on average.
  • High-beta names like Sub-Saharan Africa (SSA) were the worst performers, with an average widening of 40bp.
  • Kenya, Gabon, and Angola were the top underperformers.
  • Lower-beta CEE countries outperformed, with an average widening of only 6bp.

• ETF Outflows:

  • EM credit ETF assets have fallen by approximately 6% recently.
  • Romania, Croatia, Lithuania, and Kazakhstan bonds are particularly vulnerable to ETF outflows due to their large holdings.
  • Turkey appears to be one of the least vulnerable.

Key Information

• Z Spread Changes (as of 30 June):

  • CEE: 6bp (1W), 9bp (1M), -7bp (3M), -96bp (1Y), -51bp (YTD)
  • CIS (ex-Russia): 9bp (1W), 12bp (1M), -36bp (3M), -128bp (1Y), -37bp (YTD)
  • SSA: 40bp (1W), 54bp (1M), 10bp (3M), -220bp (1Y), -37bp (YTD)
  • Turkey: 17bp (1W), 18bp (1M), 1bp (3M), 8bp (1Y), -74bp (YTD)

• 1W Outperformers:

  • Tunisia: -1bp
  • Slovenia: 0bp
  • Israel: 1bp
  • Bahrain: 1bp
  • Kuwait: 2bp
  • Hungary: 3bp
  • Abu Dhabi: 4bp
  • Latvia: 4bp

• 1W Underperformers:

  • Kenya: 62bp
  • Gabon: 59bp
  • Angola: 52bp
  • Zambia: 41bp
  • Ethiopia: 41bp
  • Ghana: 41bp
  • Nigeria: 41bp
  • Senegal: 33bp

• Relative Value – Russia, Turkey, South Africa $ Bonds:

  • The table highlights the relative value differentials between bonds, with the focus on Z-spread Z-scores. A green cell indicates that the 'buy' bond is historically wide relative to the 'sell' bond.

• € vs $ Comparison:

  • EUR bonds are adjusted into USD-equivalent spreads.
  • The report shows the spread differentials for various countries, including Russia, Turkey, and South Africa, and notes that Turkey has the largest spread differential due to the number of bonds issued since 2012.

• Relative Value – CEE $ Bonds:

  • The table provides detailed Z-spread differentials for various CEE countries, highlighting the relative value opportunities.

Conclusion

The report highlights the ongoing pressure on CEEMEA sovereign credit due to rising interest rates and suggests a defensive strategy with a focus on buying CDS protection. It identifies Turkey and South Africa as having relatively cheap CDS basis, while also noting that certain countries are more vulnerable to ETF outflows. The data shows a mixed performance across the region, with some countries outperforming others based on their Z-spread changes and relative value metrics.