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  • Emerging Markets Debt Daily

    Argentina Sharpens “No Default” Message

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    August 23, 2019

    Argentina’s “no default” narrative remains loud and clear. Markets get a curveball in the form of China’s retaliatory tariffs.

    Argentina’s “no default” narrative remains very clear, even though the macro reality bites (consumer confidence took a big hit in August, domestic activity stopped recovering before the primaries) and sovereign bonds continue to price-in a restructuring. The presidential front-runner Alberto Fernandez stepped up his efforts to reassure market participants, saying that no one would consider a haircut on bonds that were issued just two years ago by a democratically elected government. Fernandez admitted that he had concerns about debt maturing in 2021, but emphasized that default was hurtful for society and not a solution.

    Markets were thrown a curveball this morning, as China decided to impose retaliatory tariffs on USD75B of U.S. goods. The Chinese delegation is still expected to travel to the U.S. in September, but today’s escalation—admittedly not too surprising after the latest round of U.S. tariffs—hurt risky assets in the morning trade ... until the U.S. Federal Reserve Bank Chairman Jerome Powell hinted that he will do whatever is necessary (“act as appropriate”) to sustain the expansion.

    Mexico’s final Q2 gross domestic product (GDP) sent the same message as the preliminary estimate—domestic activity is under a great deal of strain and might require additional monetary support. The seasonally-adjusted quarterly real GDP growth was cut to zero, raising additional questions about the government’s response function—especially in the fiscal space. Mexico’s slowing domestic demand has one silver lining though—the improving external balance. Today’s Q2 current account release showed just that. It unexpectedly flipped into a massive surplus (USD5.143B), adding to the fundamental support for the currency.

    Please note: Emerging Markets Debt Daily will not be published August 26—September 2. We look forward to resuming our daily updates on September 3.


    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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