Natalia Gurushina, Economist, Emerging Markets Fixed Income
January 14, 2020
China’s foreign trade numbers corroborate the “Green Shoots” story. Argentina’s Province of Buenos Aires asks for a delay in an amortization payment on a global bond.
December brought a big improvement in China’s imports, which jumped by 16.3% year-on year in U.S. dollar terms—well above consensus. A low base and the Lunar New Year effect definitely helped, but the overall imports’ recovery is very much in line with the “green shoots”/domestic stabilization narrative. The improved data flow notwithstanding, it is too early to talk about the policy support withdrawal in China. However, today’s release gives authorities some room to relax, as the past stimulus appears to be working.
It has now been officially confirmed that Argentina’s Province of Buenos Aires will ask to delay the January 26 amortization payment on its 2021 global bond until May. The resolution of the case will be closely watched as the central government is heading for its own debt negotiations. The extension might give just enough time to allow the sovereign to complete its own debt exchange first (the government is aiming for the end of March) and for Province of Buenos Aires to make a similar offer (without disrupting the bond seniority order until this happens).
I am at the Euromoney Central European Forum right now, and there is a lot of soul-searching regarding issues like the future of quantitative easing (QE) and what happens to the bond market when QE dries out, central banks’ independence, “Japanification” of Europe, the European fiscal union, Brexit, the trade war endgame and “green” market innovations. On a country level, Ukraine is an absolute star (the public debt/GDP trajectory is truly inspirational). The country’s goal is to get its local debt included in JPMorgan’s GBI-EM Index, which can further boost investor interest in this market.
IMPORTANT DEFINITIONS & DISCLOSURES
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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