HALISTER1: Brazil, El Salvador Sovereign Bonds Are Cheapest, SocGen Says

Brazil, El Salvador Sovereign Bonds Are Cheapest, SocGen Says

(Bloomberg) -- El Salvador 10-yr benchmark at 171bps from fair value, Brazil’s at 157bps, strategist Regis Chatellier writes in note.
  • Followed by Tunisia (135bps cheap), Sri Lanka (116bps) and Colombia (100bps), while Vietnam trades particularly expensive (190bps rich)
  • While Hungary is still a strong candidate for upgrade, Brazil continues to show significant downgrade pressure due to domestic factors. The external credit metrics remain relatively sound for Brazil, however, which limits the risk of downgrade
    • Current account deficit still at manageable level
    • Cenbank has let BRL depreciate to dampen effect of recession and protect FX reserves
    • Market correction on Brazil bonds overdone relative to other EM countries; SocGen remains OW on sov. bonds
  • EUR bonds have cheapened relative to USD
    • Indonesia 2025 cheapest EUR bond (109bps cheap in cross- currency terms), followed by South Africa 2026 (63bps) and Morocco 2024 (51bps)
    • Lithuania 2024 and Slovenia 2024 most expensive
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Regis Chatellier (Societe Generale SA)

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