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Market Strategy

Why Are EM Corporate Bonds Trading at a Premium Over DM's?

By Tsolmon Enkhbayar and David Nowakowski
Feb 15, 2011 3:00:00 PM | Last Updated

Editor's note: The following is a summary of views from the EMTA conference in London on January 25, 2011. There was general agreement on views, and we are not quoting by name; we specify where RGE’s views may differ.

The corporate default rate in emerging markets (EMs) dropped by 13% to below 2%. It remains over 2% lower than default rates in the U.S. and the eurozone. Yet spreads are wider in EM corporates: JPMorgan’s CEMBI trades at a spread of 251 basis points (bps) over Treasurys, while the BoA-ML U.S. Corporate & HY index has an option-adjusted spread of 227 bps. Why the[...]

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