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  • Emerging Markets Debt Daily

    Brazil Pension Bill on Right Track

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    April 22, 2019

    Brazil’s pension reform bill is well-positioned for tomorrow’s approval in the lower house committee. Markets seem skeptical about critical statements made by Turkey’s former Prime Minister.  

    In Brazil, the outlook for tomorrow’s lower house committee vote on the pension reform bill looks better
    following the removal of several contentious points from the rapporteur’s report. Importantly, these changes should have no significant impact on the projected fiscal savings. Provided the draft is approved tomorrow, the lower house should be able to form a special commission to discuss the bill. All signals suggest that social security reform is moving in the right direction, albeit begrudgingly. The improved sentiment was reflected in the real’s performance this morning, despite local reports pointing to more political infighting within the administration.

    Statements made by Turkey’s former Prime Minister, Ahmet Davutoglu, drew a lot of attention this morning, as they contained strong criticism of the country’s political setup and economic policy direction. Davutoglu stated quite bluntly that the country was moving away from free market principles and that the current economic crisis was effectively a governance crisis. Judging by Turkish assets’ reaction this morning, the market is inclined to look at it as a sign of political division within the ruling party rather than a signal for meaningful reforms.

    China’s equities are under the weather this morning following the release of the Politburo’s briefing, which sounded more bullish on the economy. The main concern seems to be that the withdrawal of stimulus will bring back downside growth risks (much dreaded “double dip”). However, a more cautious policy stance may be justified at this stage, given the extent of past easing and its impact on China’s debt ratios.  


    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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