Emerging Markets

July 18, 2014

By: Darren Viegas

South Africa To Sell Foreign Debt As Emerging Markets Rally

Summary: South Africa is about to offer international bonds for the first time in 10 months, despite a credit rating downgrade, denominated in both euros and dollars. The bonds- which are due 2044 (dollar) and 2026 (Euro) have recently been downgraded by S&P to BBB- which is on par with Brazil and Russia.

Commentary: A very interesting move for the South African government. While in the midst of a strike of 220,000 metalworkers, it will be interesting to see what these bonds sell at and who will buy them.

Indian Rupee Volatility Drops to Three Year Low As Stocks Rally

Summary: Indian Rupee volatility has fallen to a three year low as increased monsoon rains eased concerns of upcoming rapid inflation. Three month implied volatility- a measure of expected moves in the exchange rate dropped to 7.34%, the lowest in three years. The rupee also fell after Yellen gave her hawkish speech on rising rates.

Commentary: The news of increased monsoon rains is great news for India. A less than favorable rain amount would have cause a large price spike in agriculture commodities. This would potentially hurt the rupee. As we already saw by Yellen’s announcement, all emerging market currencies are not set to fare well in the event of a rate hike.

 

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