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 4bp in the past week (1W) and EMBIG-D tightened by 8bp. Spreads widened the most in BBB and tightened the most in B. Region-wise, spreads tightened the most in SSA and the least in MENA. Country level: The cheapest countries based on 6m z-scores across each rating category are currently Abu Dhabi, Panama, Trinidad & Tobago, and Senegal. The richest are Kuwait, Mexico, Serbia, and Tajikistan. 5s10s spread curves: IG curves flattened by 3bp to 18bp and HY curves flattened by 3bp to 44bp in the past 1W on aggregate. On an absolute basis, Nigeria, Colombia, and Brazil are the steepest curves. On a 6m z-score basis, Kenya, Angola and Egypt are the steepest, while Chile is the flattest. See page 11. 10s30s spread curves: IG curves flattened by 4bp to 34bp and HY curves flattened by 2bp to 39bp in the past 1W on aggregate. On an absolute basis, South Africa, Panama, and Sharjah have the steepest curves. On a 6m z-score basis, Brazil, Kenya and Guatemala are the steepest, while Paraguay is the flattest. See page 12. The CDS-bond basis: The CDS-bond basis decreased by 6bp to -20bp in the past 1W. On an absolute basis, the Dominican Republic increased the most, while Egypt 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 & Above56-1.31.2Abu Dhabi35-211.8Kuwait12-43-1.3BBB1460.11.0Panama2981521.6Mexico1460-1.6BB232-1.3-0.8Trinidad & Tobago158-751.6Serbia198-34-2.2B & non-distressed CCC544-1.8-1.5Senegal458-861.8Tajikistan738195-2.4By RegionLatAm163-1.21.7Peru122-411.7Paraguay1674-1.1Central & North America319-1.51.0Panama298-201.8Dominican Rep.229-89-1.1Europe274-2.1-2.3Hungary159-1152.8Tajikistan738465-2.4SSA564-1.3-1.1South Africa326-2382.1Kenya563-1-1.8MENA222-1.30.7Saudi Arabia89-1341.8Egypt912690-1.5Asia177-2.20.8Philippines79-992.5Mongolia290112-1.6Cheapest 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 be aware that the firm may ...
