Local currency rates and FX continue to screen attractive, as credit spreads transition to neutral.
As we look ahead to our Emerging Country Debt Strategy’s 30-year anniversary on April 19th, our team paused to reflect on how important our valuation metrics have been in discussions with our clients. We have published our Valuation Update regularly for the past decade, and we look forward to continuing to share our views in the years ahead.
Hard currency debt valuations:
- Credit Spreads: Neutral
- The current credit multiple of 2.5 is in our second quintile of attractiveness.
- Historically, a credit multiple in this quintile has been associated with a subsequent 2 year annualized credit return of 0.3% (above the risk-free rate). As a reference, the third quintile's mean return has been +4.5%.
- USD Rates: Neutral
- The forward curve remains inverted.
- We find this pricing somewhat ambiguous in generating a clear outlook, so we remain neutral.
