Default protection on single-name emerging market sovereigns has tightened across the board this week on the back of a pause in U.S. interest rate rises. The move was also prompted by improving political and economic environments in several countries. The single-name draw-in follows a three-month tight in the CDX emerging market index last week (DW, 8/7).
Traders said Ukraine led the tightening in Europe, with credit spreads swooping in to 175 basis points from 210 bps week ago and 280 bps in June. The rally was attributed to an injection of political stability after President Viktor Yushchenko nominated his long-standing rival Viktor Yanukovych as the new prime minister.
In the Americas, the benchmark Latin American credit Brazil drew in 130 basis points Tuesday from 200 bps in June. "All the emerging markets have started moving in and look like they are not going to stop in the short term," said one trader.