CDS: Looking Across The Curve For Value

BMI View: With global investors increasingly looking to unwind risky positions, sovereign credit spreads across the EM universe have shot up remarkably when compared to 12 months ago. In most cases in Latin America, we would expect to see CDS curves head south over the coming months assuming US financial concerns start to ease in the wake of the recent flurry of financial bailouts and mergers. However, in riskier cases - most notably Argentina and Venezuela - medium-term risks concerning 'ability to pay' profiles could keep spreads elevated at the long end for some time to come.

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