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zugzwang

$260Bn Of Emerging Market Debt Now Facing 'junk' Status

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A veritable flock of black swans. Russia, Brazil, Turkey, South Africa, Indonesia...

LONDON (Reuters) - After a golden decade of improvement, credit ratings for a swathe of developing economies risk falling back to "junk", with huge potential costs for up to a tenth of outstanding emerging market bonds.

Many mainstream investment and pension funds have rules preventing them from holding debt unless it is classified as investment grade by at least two of the big ratings agencies, and a number of countries are at risk due to problems ranging from tumbling commodity export prices to political instability.

Russia this week became the first of the major economies to lose its investment grade status from Standard & Poor's, falling out off the top ratings category for credits deemed to have a low risk of default for the first time in a decade.

If Moody's and Fitch follow, conservative investors barred from owning junk securities must sell their holdings. JPMorgan estimates this means they may ditch $6 billion in Russian government rouble and dollar debt.

Russia may have company. Almost $260 billion worth of sovereign and corporate bonds - nearly a tenth of outstanding emerging market (EM) debt - is in danger of being relegated to junk, according to David Spegel, head of emerging debt at BNP Paribas, who calls such credits "falling angels".

What's more, almost $1 trillion of debt is rated BBB or BBB minus - the two lowest investment grade ranks after which junk or "high yield" status awaits.

"After a year of political upheaval and collapsing commodity prices, the sky is alight with EM falling angels," Spegel said.

https://uk.finance.yahoo.com/news/falling-angels-could-hit-260-091823694.html

Edited by zugzwang

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Everyone's hating on EMs. Sentiment massively negative.

Why would that be in the mainstream? Bcos Goldmans JPM etc are buying, not necessarily long term but valuations are extremely low

EMF:SPY

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Everyone's hating on EMs. Sentiment massively negative.

Why would that be in the mainstream? Bcos Goldmans JPM etc are buying, not necessarily long term but valuations are extremely low

Can see some of the attractions, but am wary of more to play out. Also having my own problems grappling with 'what is value' against what appear to be structural deflationary burdens and contagion. Likelihood of sudden turnaround value surge in EM? Time to wait and find out a bit more, or not?

If Moody's and Fitch follow, conservative investors barred from owning junk securities must sell their holdings. JPMorgan estimates this means they may ditch $6 billion in Russian government rouble and dollar debt.
And we’ve seen that, the oil price down 50%, the dollar up over 10%. Now the dollar going up 10%, absolutely critical because you’ve got $6 or $7 Trillion dollars of debt in the emerging economies all tied to the dollar, all thinking, “Well we’ve borrowed at 1%, aren’t we clever.” Well it was 1% then, but now it’s 1% + 12% increase in the dollar. You’re going to see bankruptcies all over the emerging economies. (-Paul Hodges, on the MoneyWeek video interview the other day)

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BRIC shithouse

Yes they have all made a terrible, terrible mistake.

They'll have to turn all that gold into dollars at $400/ounce or less.

Thought all the adverts for gold was suspicious.

Glad I am not a glod bug, its going to be slaughter.

As someone said "they could suck dollars off the moon if they wanted"

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Yes they have all made a terrible, terrible mistake.

They'll have to turn all that gold into dollars at $400/ounce or less.

Thought all the adverts for gold was suspicious.

Glad I am not a glod bug, its going to be slaughter.

As someone said "they could suck dollars off the moon if they wanted"

Its over, full stop

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