CDS: Relative Value In Brazil & Argentina

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Two relative value plays in Latin America's credit default swap (CDS) market continue to look attractive to us from a medium-term perspective. In the higher-rated sovereign space, we are looking for spread widening of Mexico's 5-Year CDS over Brazil's. Meanwhile, at the riskier end of the spectrum, we see potential in buying Venezuelan 5-Year CDS and selling Argentine protection. Both calls are based on a risk-to-reward assessment of the macroeconomic fundamentals, the implications of upcoming political events and a compelling technical picture.