CEEMEA credit week ahead: As August approaches, we expect CEEMEA sovereign credit to slowly grind tighter. As we wrote in CEEMEA credit: Prepare for the August grind tighter,buy TURKEY $ '45s our economists have pushed back their next Fed hike call to March 2018 after recent inflation prints and Fed Chair Yellen’s recent comments. With low US rate volatility, we expect investors to search for yield and have added a new recommendation to buy Turkish credit, given its cheapness to the rating and diminished FX risks. We further note that the near-term technical picture is supportive, with new issuance likely to see a seasonal decline in August; on average there was just USD 0.4bn of CEEMEA sovereign issuance in August between 2013 and 2016.
www.4688.com ， Rating reviews on Friday 28 July: Azerbaijan (S&P, BB Neg), Bahrain (Moody’s, Ba2 Neg), Oman (Moody’s, Baa1), Serbia (Moody’s, Ba3), Slovakia (S&P, A ).
Last week’s performance recap: CEEMEA $ sovereign bonds were 8bp tighter on the week on the back of the positive market backdrop. The strongest performance was seen in
the higher-yielding space, with South Africa the top-performer at 15bp tighter, and Turkey also performing well at 13bp tighter. Sub-Saharan Africa saw a strong performance at
13bp tighter on average; within the region, oil-exporting Angola, Gabon, and Nigeria saw the strongest performances.
Focusing on the Turkey $ curve, we have added a recommendation to buy the 6 5/8% ‘45s; as can be seen on slide 5, the bond stands out as the cheapest on the curve, on a 3m RV basis, and currently trades wide of the ‘47s. The 10y maturity space has also underperformed (with 5s-10s at 3m highs, see slide 3), but we believe if Turkey issues a eurobond, it is most likely to be in this space. The CDS basis has performed a little in the last few days (see slide 2), and we maintain our buy 5y CDS basis recommendation.
In CEE, the Serbia ‘20s – ’21s inversion has now corrected as we anticipated on 3 July. Similarly, in SSA, Namibia has underperformed South Africa, and now trades wide again (24bp in the case of the $ ‘25s) as has historically been the case (having temporarily traded inside earlier in the month) which we see as fair.