Argentina Carry Trade Preferred Through 1H17: Morgan Stanley
(Bloomberg) -- Top pick for carry is Bote 2018, seen less vulnerable to risk-off shocks because it’s owned by more locals, Morgan Stanley analysts Aaron Gifford, Dara Blume, Simon Waever and Fernando Sedano write in note.
- Recent rally’s size and speed a headwind for local rates, likely to limit near-term gains
- 10y local yields forecast to reach 12.75% by 4Q
- Recommends selling USD/ARS 3m NDFs, sees ARS at 17.1/USD end of 2017
- EM-dedicated funds estimated to have purchased $600m of govts Jan. issuance
- Recommends Euro discount bonds, selling Argentina 5y CDS vs Peru 5y CDS; Bonars not attractive
- Investors face increase in political noise ahead of upcoming mid-term elections
- Base case is for a positive result for President Macri, but public sentiment likely to remain subdued until growth recovers, inflation retreats
- Argentina central bank expected to continue to hold rates in coming weeks, most of the easing expected in 2H17
- “The problem with gradualism is that even when things start heading in the right direction, another round of bad news appears, leading consumers and direct investors to remain hesitant for longer”
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Aaron Gifford (Morgan Stanley)
Dara Blume (Morgan Stanley)
Simon Waever (Morgan Stanley)
Fernando Sedano (Morgan Stanley)
To de-activate this alert, click
hereTo modify this alert, click
hereUUID: 7947283