EM Middle East Sovereign Bonds Impacted by the Israeli-Palestinian Conflict
Since the commencement of the Israel-Palestine conflict, the 5-year CDS (Credit Default Swap) for Middle East sovereign bonds has experienced a significant surge. 📈 Notably, the market's response doesn't reflect heightened concern. This is evident as US equities have continued to climb since the conflict's onset, while interest rates have surged back to previous highs. 📈📊 Thus far, the impact has primarily reverberated in the commodities market, with fluctuations affecting oil and gold prices. Additionally, the Middle East sovereign countries in the EM (Emerging Markets) segment have also felt the repercussions. 🛢️💰 Is the market right to be this complacent in the face of ongoing geopolitical tensions?
Emerging market stocks have fallen to their lowest valuation relative to the S&P 500 in AT LEAST 36 years
Source: Barchart, Bloomberg
A tweet by Robin Brooks: "Brazil's trade surplus remains in the stratosphere
There is no other EM that has transformed itself over the past decade in the way that Brazil has. The sharp rise in US interest rates is currently weighing on Real, but that's temporary. The massive trade surplus is permanent..."
