EUR/PHP Heading Lower

With EM external debt and equity markets in correction mode, following spectacular outperformance of the past few years, picking the next major trend is currently somewhat difficult. Sure, we still adhere to the odyssey of EM convergence theory, but the current retracement, especially in EM debt, may last that much longer given the external risks at play, and the fact that spreads are close to historic lows. Indeed, relative value trades appear the order of the day, for now at least, with our Venezuela over Russia view, for example, showing some 80bps of compression since we first promoted the idea.

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