M UpdateEM Sovereign Credit Strategy | Global Rich & Cheap WatchMorgan Stanley & Co. LLCSimon WaeverStrategist Simon.Waever@morganstanley.com +1 212 296-8101 Morgan Stanley & Co. International plc+Pascal N BodeStrategist Pascal.Bode@morganstanley.com +44 20 7425-3282 Morgan Stanley & Co. LLCEmma C CerdaStrategist Emma.Cerda@morganstanley.com +1 212 761-2344 Morgan Stanley & Co. International plc+Neville Z MandimikaStrategist Neville.Mandimika@morganstanley.com +44 20 7425-2509 Market Composite Sovereign Ratings Sovereign Valuations Bond 5s10s Curves Snapshot EUR vs. USD Bonds Snapshot CDS Snapshot ESG Snapshot Defaulted Bonds Overview Country Bond Curves 10Y sovereign bond spreads tightened by 14bp in the past week (1W) and EMBIG-D tightened by 9bp. Spreads tightened the least in BBB and tightened the most in B. Region-wise, spreads widened the most in SSA and tightened the most in Central & North America. Country level: The cheapest countries based on 6m z-scores across each rating category are currently Saudi Arabia, Panama, Colombia, and Senegal. The richest are China, Romania, Serbia, and Tajikistan. 5s10s spread curves: IG curves flattened by 1bp to 22bp and HY curves steepened by 4bp to 39bp in the past 1W on aggregate. On an absolute basis, Colombia, Brazil, and Nigeria are the steepest curves. On a 6m z-score basis, Qatar, El Salvador, and Colombia are the steepest, while Costa Rica is the flattest. See page 11. 10s30s spread curves: IG curves steepened by 4bp to 38bp and HY curves steepened by 8bp to 40bp in the past 1W on aggregate. On an absolute basis, South Africa, Jordan, and Oman have the steepest curves. On a 6m z-score basis, Egypt, Guatemala, and Pakistan are the steepest, while Malaysia is the flattest. See page 12. The CDS-bond basis: The CDS-bond basis increased by 5bp to -20bp in the past 1W. On an absolute basis, the Dominican Republic increased the most, while South Africa decreased the most over the past 1M. See page 14. Exhibit 1:10y EM sovereign bond valuation summaryCategory SpreadOutright Z-Score (6M)Vs. index Z-Score (6M)CountryCurrent SpreadSpd. Vs. CategoryZ-score (6M)CountryCurrent SpreadSpd. Vs. CategoryZ-score (6M)By RatingA & Above58-1.00.7Saudi Arabia89301.1China26-33-1.1BBB144-0.10.4Panama2891451.7Romania19046-3.0BB241-1.0-0.9Colombia3411001.3Serbia212-29-2.1B & non-distressed CCC564-1.7-1.6Senegal507-576.0Tajikistan747183-4.0By RegionLatAm170-0.61.3Peru125-451.0Paraguay1700-1.8Central & North America321-1.30.4Panama289-321.8Dominican Rep.232-89-1.2Europe285-2.3-2.3Poland95-1893.0Tajikistan747462-3.8SSA587-1.0-0.6Senegal507-804.2Mozambique823236-1.6MENA230-1.10.5Bahrain323933.0Egypt924694-1.9Asia186-1.70.8Philippines82-1041.8Mongolia310124-1.5Cheapest Country Within CategoryRichest Country Within CategorySource: Bloomberg, Morgan Stanley Research Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should...
