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Trinidad and Tobago

February 03, 2023

Country Report: Better Than Expected

The Central Bank released its quarterly economic review last Friday, with the economy growing a robust 4.1% YoY over the first half of 2022.

The manufacturing sector, particularly food, beverages and tobacco products, has had a notable performance by growing over 10% in the last five quarters.

We revised our GDP growth forecasts for both 2022 (from 3.2% to 4.4%) and 2023 (from 1.1% to 3.1%) given better-than-expected performance from the energy and manufacturing sectors.

The finance minister claimed that diversification efforts made by the government boosted the non-oil sector, however, we found that its growth was partially related to a base effect.

HOLD: Lo...

TRITOB 4 1/2 08/04/26 Price

Bahamas

February 01, 2023

Country Report: The Bahamas in 2023

We estimate that the fiscal deficit will decrease from 4.8% of GDP to 4.3% by the end of FY2023/24, while the primary surplus will increase from 0.0% of GDP to 0.7%.

Despite improving its fiscal position, The Bahamas is still facing severe financing problems.

We expect the Bahamian economy to grow 4.2% in 2023, thanks to the full recovery of international tourism.

Our baseline scenario is that the economy does not reach pre-pandemic levels until 2024.

SELL: Despite recovering a great deal of the decline of the last year, we do not see yields as an attractive risk/reward proposition for an island with rising debt service and low fiscal space to improve revenues...

BAHAMA 6 11/21/28 Price

Argentina

January 31, 2023

Strategy Viewpoint: What’s Behind the Buyback?

Bonds have gained 1.4 pts since Finance Minister Sergio Massa announced a USD 1 bn buyback operation on January 18, building up on a rally that has seen bonds jump more than 20% this year.

Short-end bonds outperformed given the announcement that the operation would primarily target ARGENT 29 & 30.

The government appears to be depleting reserves for the buyback despite its weak external position.

We believe the government’s main objective for the buyback is to increase its ability to influence the exchange rate in the run-up to the election.

We maintain our BUY recommendation despite the YTD rally. We still prefer long-end old-indenture bonds for their att...

ARGENT 0 1/2 07/09/30 Price

Egypt

January 24, 2023

Country Report: What Doesn't Kill Your Currency Makes it Stronger

The Egyptian pound has lost half of its value in the past year.

Letting the EGP float was key to securing another program with the IMF, unlocking further external financing needed to face the FX crunch caused by investors’ exit of the domestic debt.

The last devaluation happened just a couple of weeks ago at the beginning of January, and we believe it could be the last one for a time.

According to our calculations, there is no gap between GDRs’ implied exchange rate and the official exchange rate, while the real exchange rate suggests that the currency is now slightly undervalued.

Authorities are focused on rebuilding net reserves, and while it may take...

EGYPT 6.588 02/21/28 Price

EGYPT 7.903 02/21/48 Price

Jamaica

January 23, 2023

Country Report: Jamaica in 2023

The primary surplus will slightly decrease to 6.9% of GDP in FY 2023/24, while the overall fiscal surplus will reach 1.4% of GDP.

The country would decrease its debt to the lowest level in 25 years by the end of FY2023/24 (80.3% of GDP).

External headwinds and a lower base effect will cause economic growth to slow to 3.4% this year from 5.2% in 2022.

We predict that it will remain above the Central Bank’s target range of 4% to 6% until 2023Q3, declining to 5.5% by the end of the year.

SELL: Despite credit prices retreat in the last year, actual low yields are not an attractive risk/reward proposition in the current volatile context.

JAMAN 6 3/4 04/28/28 Price

JAMAN 7 7/8 07/28/45 Price

Costa Rica

January 19, 2023

Country Report: Costa Rica in 2023

After last year's contested presidential election, Costa Rican politics is more stable.

The primary surplus will increase to 1.4% of GDP in 2023, while the overall fiscal deficit will narrow to -3.3% of GDP.

Gross financing needs, equivalent to 11% of GDP, will be fully covered mostly by multilateral loans, and local and international market debt.

External headwinds will cause economic growth to slow to 2.9% this year from 4.2% in 2022.

SELL: Despite we do not see a default risk in the short term, actual yields are not attractive in the current highly volatile context.

COSTAR 4 3/8 04/30/25 Price

COSTAR 7.158 03/12/45 Price

Argentina

January 18, 2023

Flash Note: Some Thoughts on the Buyback

Argentine Finance Minister Sergio Massa announced a USD 1 bn Eurobond buyback.

The operation will focus on the short end of the curve, particularly the 2029 and 2030 global bonds.

The financing and timeframe of such an operation remains uncertain, but according to media reports the buybacks have already started. Minister Massa also suggested additional buybacks could follow the one announced.

We believe there is no chance Argentina will regain market access in the short term, and that the impact of the buyback on sustainability will be marginal.

ARGENT 0 1/2 07/09/30 Price

El Salvador

January 18, 2023

Country Report: El Salvador in 2023

This year, Bukele’s political agenda will be centered around the presidential election of February 2024.

We estimate that the overall balance will reach -3.0% of GDP, 500 b.p. lower than the deficit of 2.5.% projected by the government.

The pension reform will allow the government to obtain more financing from the AFPs, which, coupled with the multilateral funding and the SDRs, will be enough to cover the financing needs for this year.

We expect a slowdown in economic activity due to the bleak economic outlook for the US, therefore, we estimate GDP growth of 1.3% in 2023.

ELSALV 8 5/8 02/28/29 Price

ELSALV 7 5/8 02/01/41 Price

Ghana

January 18, 2023

Flash Note: Defaults Are Never the Same, but They Often Rhyme

With the suspension of the country’s external debt service, investors’ fears of an external debt restructuring have materialized.

We took another look at two relatively recent restructurings (Argentina & Ecuador, 2020) and drew conclusions we believe are applicable to the Ghanaian curve.

Given the slightly higher prices for short-end bonds, the market seems to expect a swap offer package from Ghana similar to the ones seen in our case studies.

One difference is that the GHANA 26 bond, which benefits from older CACs that provide slightly better protection, has no premium vs the rest of the curve, offering an interesting opportunity.

GHANA 7 5/8 05/16/29 Price

GHANA 8.627 06/16/49 Price

Ecuador

January 17, 2023

Country Report: Low Stakes, High Risk

Local elections and the referendum is scheduled for February 5, with polls still showing a high percentage of undecided voters and tight results.

We focused our attention on the two biggest provinces and their capitals: Guayas (Guayaquil) and Pichincha (Quito).

In both cities it seems that nothing is written in stone, current prefects and mayors enjoy the lead over the rest of the candidates but for less than 5 points.

Regarding the referendum, our base case scenario contemplates an overwhelming approval of all of his proposed amendments, opening the door to future referendums to get approved Lasso's initiatives.

Given the low near-to-mid-term default risk, str...

ECUA 0 1/2 07/31/30 Price

Venezuela

January 12, 2023

Country Report: Venezuela in 2023

In 2022, oil production rebounded to an average of 684 tbd, 26% up against the 540 tbd seen the previous year.

Given newly available central bank data, we re-estimate GDP growth for 2021 and 2022 to 10.0% and 15.6%, from 6.2% and 9.1%, respectively.

This year, we expect loosening restrictions on Chevron to provide a 16% rise in oil production to an average of 795 tbd and help sustain growth at 9.8%.

However, we see more upside than downside to this forecast, as further relaxation of sanctions would allow more growth in oil production leading to a higher GDP growth rate.

After Juan Guaidó’s ouster from the interim presidency, the opposition is now focus...

VENZ 9 1/4 09/15/27 Price

VENZ 7 03/31/38 Price

Suriname

January 11, 2023

Country Report: Suriname in 2023

We will be following developments in the oil sector and paying special attention to the final investment decision by TotalEnergies and APA Corp, which was delayed until mid-year.

We believe that the government will make the necessary efforts to obtain the disbursement corresponding to the combined second and third reviews scheduled for March 15.

We expect an overall deficit of -1.5% of GDP and a primary surplus of 0% for 2023, assuming the government will not resume interest payments this year.

We believe that Suriname will register modest growth in 2023 (2.9%) as private and public consumption will remain well below pre-pandemic levels.

SELL: Without an...

SURINM 9 1/4 10/26/26 Price

Turkey

January 10, 2023

Country Report: Better Sooner Rather Than Later

President Erdogan is pulling out all the stops to maintain his grip on power, persecuting popular Istanbul mayor Ekrem İmamoğlu to keep him out of the race and freezing the funds of the largest pro-Kurdish party.

Despite the unhappiness given the economic situation, we believe that President Erdogan has become the frontrunner in the presidential race.

We believe that the disorganized opposition has better chances in the legislative elections, and expect the government and its allies to be unable to secure a simple majority in parliament.

We believe the election will take place between late April and May.

HOLD: With Erdogan as favorite for the presidential electio...

TURKEY 6 1/8 10/24/28 Price

TURKEY 5 3/4 05/11/47 Price

Angola

January 06, 2023

Country Report: Angola in 2023

President Lourenço secured a second presidential period, but this time without a supermajority in parliament.

Oil output has stagnated, and authorities will need to address this concerning issue, given the relevance of the oil revenues for the external accounts and exchange rate stability.

We expect the government to maintain its fiscal discipline and forecast a positive fiscal primary balance of 3.0% of GDP.

We forecast a 3.4% real GDP expansion for 2023, and an inflation rate in the single digits (9.6%).

We maintain our BUY stance for Angola, given the combination of healthy fundamentals and an interesting current yield, but caution about the tail risks as...

ANGOL 8 1/4 05/09/28 Price

Global

January 05, 2023

EMFI Monthly Review – December

Our EMFI Core Index gained 1.7%, with 14 out of the 20 countries posting gains, 3 holding steady and 3 losing ground. The index finished the year with a 19.7% loss.

ARGENT (+9.3%), ELSALV (+4.6%), and ECUA (+3.9%) were the month’s most notable outperformers, while UKRAIN (-7.1%), LEBAN (-2.6%), and ANGOL (-1.4%) underperformed.

Our Research Team continued releasing our Year Ahead reports, in which we lay out our macroeconomic and political views for each name in 2023.

We also released our outlook for the year and our top picks in the asset class. We favor performing credits at low valuations that offer high current income (ARGENT, ANGO...

Global

Egypt

January 04, 2023

Flash Note: One Step at a Time

On December 30, President Al-Sisi announced the state would withdraw from 62 economic activities (though no detailed list of the sectors has been published) and lifted the requirement for importers to use letters of credit.

Both decisions were objectives of the IMF program approved in late December, intending to increase the role of the private sector in the economy.

The EGP suffered today it's third major fall in less than a year, easing some concerns about the posibility of the government abandoning the flexibility of its currency, a major goal of the IMF program.

We believe these steps reaffirm the Egyptian government’s commitment to the reform plan.

EGYPT 6.588 02/21/28 Price

EGYPT 7.903 02/21/48 Price

Switched On

Trinidad and Tobago

Country Report: Better Than Expected

Bahamas

Country Report: The Bahamas in 2023

Argentina

Strategy Viewpoint: What’s Behind the Buyback?

Egypt

Country Report: What Doesn't Kill Your Currency Makes it Stronger

Jamaica

Country Report: Jamaica in 2023

Costa Rica

Country Report: Costa Rica in 2023

Argentina

Flash Note: Some Thoughts on the Buyback

El Salvador

Country Report: El Salvador in 2023

Ghana

Flash Note: Defaults Are Never the Same, but They Often Rhyme

Ecuador

Country Report: Low Stakes, High Risk

Venezuela

Country Report: Venezuela in 2023

Suriname

Country Report: Suriname in 2023

Turkey

Country Report: Better Sooner Rather Than Later

Angola

Country Report: Angola in 2023

Global

EMFI Monthly Review – December

Egypt

Flash Note: One Step at a Time

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