Emerging market (EM) dollar-pay spreads widened six basis points (bps) to 399 bps over US Treasuries, while local debt yields widened by 13 bps to 6.59%. EM currencies were generally weaker against the dollar, with the Indonesian rupiah (-2%) and South African rand (-1.8%) exhibiting the most depreciation over the period. The Argentine peso (+1.1%) outperformed.
In the Dominican Republic, incumbent President Danilo Medina was reelected for another term in office by a large majority (over 60% of the vote). Medina, who had been widely expected to win elections, has pledged to move forward with additional fiscal and power sector reforms.
In Chile, the central bank maintained its reference rate unchanged at 3.5%, in line with expectations. In its statement, the board noted that inflation remained above target while growth, while in line with internal forecasts, was still tepid. In Argentina, the central bank lowered the rate on its 35-day central bank bills (a policy rate proxy) by 75 bps, to 36.75%, on signs that inflation is starting to turn. In South Africa, the central bank (SARB) held its policy rate on hold at 7%, marking a pause after 75 bps of tightening this year. Inflation in South Africa remains above the upper bound of the SARB's target (6%), registering 6.5% y/y in April. Similarly, the central bank of Malaysia kept its reference rate unchanged at 3.25%.
In Chile, Q1-16 GDP expanded by 2% y/y, with the external sector (stronger exports and a decline in imports) contributing positively to growth. Mexico's final estimate of Q1-16 GDP was released, with growth increasing by 2.6% y/y. This was in line with the flash print released in April. In Russia, preliminary first quarter GDP pointed to a 1.2% y/y contraction, a print that was better than the consensus estimates for -2% y/y growth. In Thailand, economic activity also surprised to the upside, expanding by 3.2% y/y. This outturn was supported by a boost in government spending. Last, Philippine Q1-16 came in at 6.9% y/y. Investment, which increased by 25.6% y/y, was the largest contributor to growth.
In ratings news, Moody's lowered Saudi Arabia's sovereign rating to A1 from Aa3; it left the country on 'stable' outlook. In its statement, Moody's highlighted the negative impact of lower oil prices on Saudi Arabia's credit profile.