UNITED STATES

The US has got it bad, at least that is what seems to be grabbing the markets’ attention lately. With the COVID cases rising to have surpassed 10 mio globally and states pausing the lockdown easing, the fears of the “second wave” of the virus (or the “uncontained first wave” in some opinions) is resurfacing again, creating volatility in the markets. While Friday’s open saw a firmer tone enter in European stocks, this retraced after a sell-off post the US open (SPX -2.4%, MSCI EM Index dipped 0.6%, Nikkei 225 climbed 1.1% and DAX sank 0.7%). Treasuries continued to rally with 10Y yield 4.6bps to end the day at 0.64% area, while German 10Y bund lost 2bps in yield to close at -0.48%. Brent also followed the markets on Friday, slipping more than 2% off the initial Friday highs to $40.5/b levels.

MENA

In MENA, HY names followed the market moves on Friday, starting the day on a firmer tone with EGYPT 50 rising 60c to 99.6 levels and OMAN 47 up same to 87.8 levels, however both reversed the gains later in the day together with oil and ended the day flat. IG space fared better with KSA 60 rising as much as 1.5pts in the long end and despite selling 50c off intraday highs, still ended the day up almost 1pt. Similar moves were also observed for ADGB and QATAR, although to the lesser extent.

LATAM

In LATAM, Friday’s session was relatively dominated by the risk-off sentiment. Better selling led to higher beta names selling around 50c-1pt (ARGENT, ECUA, BRAZIL) while IG names saw real money demand. COLOM seemed to outperform, with new COLOM 51 ending the day 20-30c lower from the open but well above the week’s lows. MEX seemed to be better offered with the curve rising around 4bps off Friday lows in yield. The US Ambassador’s to Mexico comments, that stated that it’s not a good time to invest in that country as the Mexican government has not fulfilled its promise not to change the investment rules that were in place when it took office in December 2018, did not help as well.

RUSSIA

Russia is holding a vote on the amendment of Constitution this week, with the one-off national holiday being announced on the vote day, 1st of July. The amendment, among other things would allow Putin to stay in power until 2036 (vs current mandatory step down in 2024) as well ass broadening  the scope of his power, proposing that the president may “direct the general work of the government”, making it easier for him to replace prime ministers, fire justices from both the Constitutional and Supreme Courts (although the latter would require the approval of Russia’s upper house of Parliament, although the president also has the power to appoint members to the body). Furthermore, the revised constitution would not allow international law to be given priority in Russia, and not even applied in instances where the Russian Constitutional Court declares it to be in conflict with Russian law, something that could potentially cause damage to Russia’s relations with international investors. Russian sovereign curve flattened on Friday, with RUSSIA 47 tightening 8bp in yield (+1.7pts in price) while RUSSIA 26 rose 4bp (-30c). Belarus underperformed, with newly issued BELRUS 31 and 26 both slipping 3-4pts in price. UKRAIN was also weaker, with the curve rising 30-40bps in yield.

SSA

In SSA, the session continued to be volatile although remarkably resilient week on week, ANGOL 25 was seen trading as high as $92 levels during the day on Friday, just to reverse to be offered below $90 levels late in the evening. NGERIA remained relatively flat, with NGERIA 49 trading at low-mid 101 levels, seemingly getting a demand boost following the midweek announcement that the Eurobond issuance for the country was not on the immediate agenda as well as the larger expected budget support from the World Bank.