Paris-based Fortis Investment Management is looking at launching another collateralized bond obligation backed by emerging market sovereign debt. Raphael Marechal, senior emerging market fund manager, says that at the moment spreads on emerging market sovereign debt are too tight to launch a new CBO, but once they widen out Fortis will consider putting together a new deal.
Spreads on the J.P. Morgan Emerging Market Bond Index were roughly 500 basis points over Treasuries late last week, considered a very tight level for emerging markets. Marechal says that if the EMBI were to widen by 100 basis points or so, that would be the level where a new CBO could offer good returns for equity investors. Fortis' last emerging market CBO was a $154.8 million deal launched late last year.