Fiscal deficit management and debt sustainability are two vital economic themes right now, given that governments across the world have been boosting public spending to reinvigorate their economies. In this respect, two charts immediately grab my attention. These charts appeared in Business Monitor Online earlier today, and in BMI’s weekly Emerging Markets Monitor magazine.

The [Read more...]

Japanese Government Bond (JGB) yields have been testing key technical levels over the past day or so. On Tuesday, the 10-year yield hit a five-month high of 1.48%, up sharply from 1.25% at the beginning of October. The yield failed to break higher on Wednesday, but I am watching resistance (or support in price terms) [Read more...]

My colleagues and I have long viewed the spread of the Russian 5-year credit default swap (CDS) over its Turkish counterpart as a useful broad-based indicator for investor risk perceptions in Central and Eastern Europe (CEE). While Russia’s relatively weaker macroeconomic profile has meant that its sovereign CDS has underperformed amid spikes in investor risk [Read more...]

Over the past several months, there has been a clear disconnect between credit default swap (CDS) markets and sovereign ratings in the emerging Europe region. While CDS spreads across the board have spiked to record highs, in some cases beyond 1,000 basis points (Kazakhstan, Russia, Ukraine, Latvia), the downgrades from the ratings agencies have been [Read more...]

Here we are again. Another global economic slowdown, another spike in global risk aversion, another collapse in soy prices, and another Argentine sovereign default. Or at least that’s what the 1-year CDS is pricing in, currently trading at 4,615 basis points. That’s no joke – it now costs US$461,500 to insure US$1mn against an Argentine [Read more...]

The Kirchners continue to make a fine mess of everything economic related in Argentina. The administration was almost brought to its knees in July, when President Fernández’ second-in-command (after hubby Nestor, naturally) Julio Cobos decided to flex his congressional muscles and use his deciding vote to reject the controversial export tax on grains – incidentally, [Read more...]