Emerging market dollar-pay spreads narrowed 5 basis points (bps) on the week to 381 bps over US Treasuries; local debt yields declined by 2 basis points to 6.85%. EM currencies were mixed against the dollar. The Malaysian ringgit (+4.1%) and the South Korean won (+2.5%) led gains. The Russian ruble (-1.4%) and the Hungarian forint (-1.3%) were the weakest performers.
In Argentina, opposition candidate Mauricio Macri won second round presidential elections. He will assume office on December 10th. These elections mark the end of the President Cristina Fernandez de Kirchner's tumultuous tenure. She and her husband had alternated power since 2003 and had favored an interventionist style of governance. This ultimately led to the country's default on external debt (due to a legal dispute) and significant macroeconomic imbalances. Macri, the former mayor of Buenos Aires, appealed to voters by espousing a message of change. He is known for his effective management of the city of Buenos Aires over the last 8 years.
In Israel, the central bank left the monetary policy rate unchanged at 0.1%. In its statement, the central bank noted that monetary policy will remain accommodative for a considerable time. Similarly, Turkey's central bank remained on hold, leaving its policy rate (one week repo rate) at 7.5%. Despite above-target inflation (7.6% year-over-year in October), Turkey has been on hold since February. In a surprise move, Nigeria cut its policy rate by 200 bps to 11% and lowered banks' cash reserve requirements. The monetary policy committee cited weakening economic activity, higher unemployment, and an uncertain global backdrop.
In Peru, third quarter growth printed 2.9% y/y, in line with consensus expectations. On the supply side, the mining and hydrocarbon sector exhibited solid performance expanding at an 8.7% y/y pace. In South Africa, third quarter GDP was lackluster, growing by a modest 1.0% y/y; consensus was looking for economic activity to increase 1.3% y/y. The agricultural sector was particularly weak (-16% y/y), while manufacturing activity exhibited signs of stabilization (+1.4% y/y) following a contraction in the second quarter.
Fitch downgraded Mongolia from B+ to B on November 24, but left the sovereign on Stable outlook. In its decision, Fitch noted that constraints to the credit outlook include strained external liquidity, fiscal challenges, and a weaker medium-term growth outlook. In contrast, Moody's changed Argentina's sovereign outlook to 'positive' following the victory of Mauricio Macri. Moody's noted that a Macri administration is more likely to implement "credit positive policies" including a resolution with holdout creditors. Moody's rates Argentina's long term foreign debt Ca.