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BarCap identified some catalysts for a correction

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BarCap identified some catalysts for a correction

Time: September 9, 2015 from 6pm to 7pm
Location: http://www.fifa16coinbuy.com
Event Type: http://www.fifa16coinbuy.com
Organized By: sandywang5230
Latest Activity: Sep 9, 2015

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Event Description

Follow ChrisSmith813Emerging Markets Not Reliving Taper Tantrum II. The U.S. dollar is back to flexing its muscles again, and when that happens risk assets tend to take a fall. A stronger dollar has been helped by acknowledgment that the Fed will definitely hike interest rates sometime this year as the market has predicted following a string of some positive economic data. On balance, most emergingcurrencies have had a poor month and if dollar strength continues then the trend is clear for short term EM forex. The ruble is back trading into the low 50s and the Brazilian real is no longer in the high 2s anymore, closing Thursday at R$3.16. It will likely settle back to the R$3.20s before reversing. With the Fed raising rates for sure now, emerging marketinvestors recall the May 2013 market correction on the heels of news that the U.S. central bank would ease up on its distressed asset purchases, namely the mortgage backed securities that blew up the economy in 2008. Barclays said after market hours on Thursday that fund flows into emerging market bondsduring periods of market volatility show thatthis type of investment may hold up better during the looming Fed hiking cycle than it did during the May 2013 taper tantrum. “If outflows do occur, emerging marketcorporates could outperform emerging marketsovereign buy fifa coins debt, at least initially,” says BarCaps fixed income team led by Badr El Moutawakil out of London. Emerging market credit spreads for both corporate debt and government dollar denominated debt widened by just around 10 bips this week. There were a number of ‘risk-off’ drivers in the mix, including falling oil prices, the looming deadline for Greece’s IMF repayment on June 5, Ukraine considering a debt moratorium and the FIFA investigation and its implications for Russia and Qatar, which are burning through money to get ready for the 2018 and 2022 World Cup in their respective countries. The spread widening on Thursday may simply be the beginning of a correction to more justifiable spread levels after an over-aggressive rally, particularly in Russia and Brazilian local currency debt. Barclays recently turned tactically cautious on emerging market credit based on overly-optimistic valuations. BarCap identified some catalysts for a correction, with the most prominent being the looming Fed hike. Emerging market investors are naturally questioning whether a hike could have the same detrimental impact on credit valuations as Fed balance sheet tapering two years ago. “The current situation is different from 2013, but historical behavior may still be instructive,” writes Moutawakil.

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