CDS: Favouring Peru Over Colombia

With equity markets in Latin America looking shaky, and our broadly bullish forex views playing out - we are up an implied 0.6% on our bullish CLP/US$ Key Market View - we return our attention to the fixed income markets. On this front, we still believe that sovereign creditworthiness will remain well anchored in 2011, as the re-pricing of risks following the global financial crisis has largely run its course. Given that significant compression in regional credit default swap (CDS) markets is therefore unlikely, we continue to look for relative value plays between the major economies.

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