Halister News

--ELIZABETH FOURNIER

(Bloomberg) -- “The recent agreement with the rebels has considerably reduced the risk of a wide-spread crisis” in Ivory Coast and the sovereign bond valuations are “attractive,” Societe Generale analyst Regis Chatellier comments in note to clients.

• While cocoa prices of ~$1,900/ton are near historical lows, downside “is limited”
• “Ivorian bonds are one of the cheapest among EM and they should outperform once the new sovereign bond is issued”
  • NOTE: May 16, Ivory Coast Soldiers End Mutiny as Government Pledges Payout Link
• Ukrainian exposure reduced to “light overweight”
  • “The fiscal account has been deteriorating and public debt/GDP is fast approaching 90%”
  • “The country has massively outperformed the index in the past four weeks, so that valuations have become less attractive”

(Bloomberg) -- The dominant force behind post-financial crisis declines in G-4 long-term sovereign debt yields has been changes in term premium, whose co-movement has also driven the correlation between them, Goldman Sachs strategist Alexander Demyanets wrote in a note Thursday.

• Term premium, or extra compensation investors demand to hold long-term bonds, remains historically very depressed as a result of G-4 central banks’ quantitative easing programs
• “Compensation for duration risk in G-4 bond markets is poor,” given low term premium
• “As QE policies are unwound, term premia should normalize, supporting our bearish view on long-term rates,” Demyanets wrote
• Goldman Sach’s economists predict Federal Reserve will “telegraph” balance sheet normalization at the December FOMC meeting, with risk skewed toward September
• NOTE: Minutes released Wednesday from May FOMC meeting included a discussion detailing the likely plan for allowing debt holdings to roll off

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Jenny Paris

--DYLAN GRIFFITHS

Economic Release Details: {SARPRT Index ECOD} --ALASTAIR REED