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📍EM Sovereign Credit Strategy Global - Morgan Stanley Research Summary

Date: January 14, 2025

📌 Overview

• Focus: EM Sovereign Bonds, Global EM Sovereign market updates.
• Authors: Simon Waever (Lead), Emma C. Cerda, Pascal N. Bode, Neville Z. Mandimika.

💰 Last Week's Bond Spreads Changes

• EM Global (EMBIG-D): +4 bp.
• BB Splits: Widened the most.

🌏 Regional Bond Spread Movements

• Sovereign Spreads:
  • Widest widening in Central & North America, tightening most in Asia.
  • Widening (+) or tightening (-) by region and rating bucket.

💰 Valuations & 6M Z-Scores

• Cheapest Countries (6m Z-score Highs): Saudi Arabia, Panama, Paraguay, Egypt.
• Most Expensive Countries (6m Z-score Low): China, Indonesia, Armenia, Ecuador.

📈 Yield Curve Changes

• IG vs US IG (Yields):
  • EM IG steepened (5s10s spread) by 3-20bp, HY by 1-4bp.
  • Steepest curves: Ivory Coast (20-44bp), Brazil (6-7bp) etc.

⚖️ Market Relationships

• CDS-Bond Basis: Decreased to -64bp overall.
• EUR-USD Spread Differentials: Notable in EM vs US 10Y bonds.

🧐 Strat View / Changes (Observational Data)

### 📈 Summary Points from Report

• Pricing: Sovereign bonds are "rich" or "cheap" based on Z-score comparison vs. rating curve.
• Changes: High ratings trades are leading IG curve steepening while HY shows containment in slope.
• Outlook: Macro risks to EMBIG remain, but dollar carry and policy tailwinds likely offset temporary yield selloff concerns.

🔍 Notes On Accession Of Disclosures

• Morgan Stanley Research is subject to disclosure regulations by business unit and jurisdiction.
• Conflict management and analyst certification included.

Report produced by Morgan Stanley Research Global EM Sovereign Strategy.

😊 For important investment-related details, please consult the full report and applicable disclosures.