HALISTER1: Investors Should Favor Brazil Local Bonds Within EM: SocGen

Investors Should Favor Brazil Local Bonds Within EM: SocGen

(Bloomberg) -- Real yield differentials over UST should narrow on LatAm’s attractive yields, as most commodities expected to rally and LatAm FX to stabilize in next year, analysts from Societe Generale including Frances Cheung and Amit Agrawal say in July 4 report.
  • Brazil and Colombia should benefit the most within Latam
  • Latam real yield spreads over UST should narrow as FX risks are reduced on CMD rally
  • Investors should favor BRL local bonds as more developed market yields go negative, as long as FX risk is manageable
  • Brazil yields should fall in Q3 on lower UST yields and easing inflation
  • Mex bonds likely to move lower along with USD rates this year, and the rate curve may pause flattening as it gradually prices out rate hike expectations in coming months
  • Chile-US real rate spread should remain wide on FX weakness as copper is most at risk of China growth slowdown and CNY depreciation
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
GLE FP (Societe Generale SA)

People
Amit Agrawal (Societe Generale SA)
Frances Cheung (Societe Generale SA)

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