德银-新兴市场-投资策略-新兴市场固定收益：如何定位到年终-20171012-Deutsche_Bank-EMEA_Fixed_Income：How_to_position_into_year-end_19页

EMEA Fixed Income Summary: Year-End Positioning

Core Content

This document provides an analysis and trade recommendations for EMEA (Europe, Middle East, and Africa) fixed income markets, focusing on the impact of core rate repricing on EM local bonds and the relative exposure of different countries to US Treasury yields (USTs). It highlights how beta levels (sensitivity of local bonds to USTs) have changed and offers strategic positioning based on current valuations, inflation dynamics, and macroeconomic outlooks.

Main Findings

• Betas to Core Rates: Although still below historical peaks, betas in EMEA local bonds to USTs have increased sharply, making them more sensitive to rate changes. In contrast, betas in Asia remained stable, and they declined in Latin America (LatAm).
• Risk of Underperformance: EM local bond markets are at risk of underperformance due to the house view for 10Y USTs remaining above forwards. Countries with historically high sensitivity to US rates or current short-term betas below long-term (LT) average betas are particularly exposed.
• Most Resilient/Exposed Countries: Based on a combination of LT betas and current beta relative to LT betas, Romania, India, and Malaysia are the most resilient, while Brazil, Mexico, Peru, and South Korea are the most exposed. The rankings for South Africa and Israel have improved, while Chile, Peru, Poland, and South Korea have deteriorated.

Trade Recommendations

Russia

• Recommended Trades:
  • Stay long in OFZs, with best entries in Aug-21 or Mar-33.
  • Keep 1Y IRS receivers on the local swap curve.
  • Express a steepener bias in cross-currency swaps (XCCY) by being short in 5Y5Y against long in the bell of the curve or bonds, given favorable ASW-spreads.
  • Consider outright 5Y5Y IRS payers.
• Rationale: Improved macro vulnerability, robust domestic growth, and low beta to USTs support Russian fixed income. Despite richer valuations, there is still room for a rally due to expected rate cuts and favorable inflation outlook.

Turkey

• Recommended Trades:
  • Express a medium-term constructive view on local fixed income.
  • Enter longs in Aug-22, Mar-25, and Aug-27 on the local curve.
  • Expect 1Y XCCY to rally back to the 11.50–12.00 range.
  • Maintain a steepener bias in cross-currency swaps.
• Rationale: Recent weakness has created attractive entry levels, with low positioning and stretched betas. The country is expected to benefit from a potential retracement in USTs and favorable inflation dynamics.

Israel

• Recommended Trades:
  • Keep short-end forward starting receivers, best expressed as being long the 3Y forward 1Y rate.
  • Remain long in 5Y5Y IRS vs. US swaps.
  • Position into long-end bonds vs. paying 2Y ILS.
• Rationale: Light positioning and favorable inflation dynamics make Israeli fixed income attractive. The steep forward curve and attractive roll down support further flattening of the yield curve.

Romania

• Recommended Trade:
  • Keep an overweight on long-end bonds, best in Feb-25.
• Rationale: Low beta to USTs, attractive valuations, and a steep curve support long-end positioning.

Czech Republic

• Recommended Trades:
  • Re-enter 5s10s IRS steepeners.
  • Keep longs in 10Y bonds vs. bunds on valuation.
• Rationale: Steady-state return characteristics and a flat curve make steepeners and long-end bonds attractive.

South Africa

• Recommended Trades:
  • Keep longs in R2032 with active FX hedges.
  • Favor hybrid flatteners in R2040 vs. 10Y IRS.
  • Keep 2Y2Y IRS receivers, although trading out of money.
• Rationale: Recent weakness has created entry opportunities. Hybrid flatteners and 2Y2Y receivers offer carry and protection against further rate easing.

Hungary

• Recommended Trades:
  • Keep a flattener bias by paying 5Y IRS and receiving long-end bonds (best 25/B or 28/A).
  • Close short-end receivers.
• Rationale: Steep curve and favorable inflation dynamics support flattener trades. Light positioning and higher risk-premia in bonds make them attractive.

Poland

• Recommended Trades:
  • Remain overweight in 5Y local bonds, best in Aug-21 and Jul-27 on valuation.
  • Favor 2Y2Y IRS receivers due to favorable inflation dynamics.
• Rationale: Light positioning, stretched betas, and favorable inflation dynamics support the bullish outlook. The yield curve is expected to flatten further, with 10Y bonds targeting 2.00% by year-end.

Key Metrics and Outlook

• 10Y Bond Yield Forecasts (end-17):

  • Czech Republic: 1.25%
  • Hungary: 2.75%
  • Israel: 2.00%
  • Poland: 3.25%
  • Romania: 3.90%
  • Russia: 7.30%
  • South Africa: 8.75%
  • Turkey: 10.75%

• Expected Trends:

  • The DB Strategy rates team does not expect a sudden spike in US treasuries.
  • The house view for 10Y USTs at 2.75% by end-17 is well above forwards.
  • EM local bond markets are at risk of underperformance, especially for those with high beta exposure.

Conclusion

The report emphasizes the importance of beta levels in determining exposure to US rate repricing. Countries with historically high betas and current beta levels above LT averages are more vulnerable, while those with low betas and current beta levels closer to LT averages are more resilient. The trade recommendations reflect the current market dynamics, with a focus on positioning in long-end bonds, steepeners, and receivers based on valuation, inflation expectations, and carry opportunities.