Weekly Newsletter

Executive Summary: For the week ended 14 August 2026, EM credit markets traded broadly rangebound with EM investment-grade spreads essentially unchanged and EM high-yield modestly wider. Local-currency EM funds recorded continued inflows while hard-currency flows remained flat. July US CPI slowed to 3.4% year-on-year with core CPI at 2.5%, while China’s July credit contracted by RMB340bn, the largest monthly decline on record. Brent crude rose into the mid-USD 90s amid Strait of Hormuz disruptions.

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*Weekly Snapshot: Key Drivers & Regional Flows*

Regional Credit Developments

🌍 EM Ex-Asia Credit

• Mexico (Sovereign): 5Y CDS tightened approximately 3bp over the week of 10-14 August; cash sovereign bonds closed 2-5bp tighter as local selling was absorbed by real-money and hedge-fund demand.
• Panama (Sovereign): Sovereign bonds outperformed after several sluggish weeks, supported by renewed buying interest particularly in the long end of the curve.
• Peru (Sovereign): Sovereign bonds tightened modestly over the week as investors monitored the possibility of upcoming sovereign issuance.
• Brazil (Sovereign): Underperformed regional peers with fast-money selling pushing spreads 4-5bp wider intraweek before hedge-fund buying emerged; 5Y CDS finished approximately 5bp wider on the week.
• Argentina (Sovereign): Remained the main regional underperformer with sovereign bonds declining 30-90 cents and spreads widening around 20bp amid persistent local and hedge-fund selling; some real-money demand observed from midweek.
• Ecuador (Sovereign): S&P upgraded sovereign rating to B from B- on Thursday, citing continued fiscal adjustment, access to official and market financing, and improved external position. Ecuador bonds outperformed with some issues gaining up to 40 cents; ECUA curve was broadly flat to +0.50pts week-on-week.
• Aegea (AEGEBZ): Moody’s changed outlook to negative from rating under review on Thursday, citing weak liquidity despite completion of BRL2.1bn capital raise. AEGEBZ bonds down approximately 0.75-0.50pts week-on-week.
• Braskem (BRASKM): Reported strong 2Q 2026 results supported by strong chemical spreads. CFO stated company in regular conversations with creditors about capital structure. BRASKM complex closed week in range of -0.25 to +0.50pts versus prior week.
• Raízen (RAIZBZ): Reported strong 2Q 2026 results with weaker sugar and ethanol business offset by strong energy distribution in Brazil. RAIZBZ curve closed approximately +2.0pts week-on-week.
• CSN (CSNABZ): Reported better-than-expected 2Q 2026 results although free cash flow remained negative. Exchange and consent solicitation for 2028 bonds settled with 77% participation. CSNABZ 2030/2031/2032 bonds rallied +5 to +8pts on week; 2028 holdouts up +2.5pts. New 2030 bond closed at cash price 81.5 (YTM 18%).
• Nexa (NEXA): Reported strong 2Q 2026 with zinc output rising 8% year-on-year to 79kt and Peru operations normalized. Zinc, copper, silver and gold prices increased 31%, 40%, 117% and 37% year-on-year respectively. NEXA curve ended week unchanged.
• Arauco / Empresas Copec (CELARA): Arauco announced Empresas Copec will provide Equity Support Agreement of up to USD 450mn available between 1 January 2027 and 31 December 2028, in addition to previously committed USD 1.2bn capital injection with USD 400mn remaining to disburse in 2H 2026. CELARA curve traded -0.625pts to unchanged week-on-week.
• Romania (Sovereign): Moody’s affirmed Baa3 rating early in the week, supporting sovereign bonds which outperformed regional peers before later profit-taking.
• Turkey (Sovereign): Sovereign CDS tightened approximately 7bp during week of 10-14 August, supported by local and real-money demand.
• Benin (Sovereign): Moody’s upgraded rating to Ba3 from B1. Eurobonds gained as much as 2 points over the week.
• Nigeria (Sovereign): Sovereign bonds traded actively and finished firmer on week amid strong relative-value demand and healthy activity in cash bonds and swaps.
• Zambia (Sovereign): Election dominated local news flow with reports of ballot disruptions and temporary suspensions of vote counting coinciding with modest weakness in sovereign bonds.
• Lebanon (Sovereign): Remained one of most actively traded Middle East credits. U.S. security-assistance proposals, progress in Israel negotiations, and parliamentary approval of amended bank resolution law reported. Bonds rallied 13-25 cents as new buyers replaced earlier sellers.
• Pegasus (PGSUST): Reported weak 2Q 2026 with EBITDA declining sharply and margins compressing due to materially higher fuel costs and Middle East operations disruptions. PGSUST 2031 bonds broadly flat week-on-week.
• airBaltic (AIRBAL): S&P downgraded to CCC- from CCC+ on concerns over potential debt operation and maintained negative outlook. Airline released new business plan including debt restructuring component. AIRBAL 2029 bonds fell approximately 15pts to low-20s price area week-on-week.
• DP World (DPWDU): Reported resilient 2Q 2026 results despite ongoing Strait of Hormuz closure disrupting Middle East trade flows. DPWDU bonds unchanged on week.

🇨🇳 Asia Credit: China Property & HY

• Far East Consortium / Faecao (Perpetuals): Perpetuals traded up approximately 3pts, supported by increased market focus on potential liability-management exercise.
• Las Vegas Sands-linked / Lasude (8% 2029): Newly exchanged 2029 bond opened around USD 89 and finished week at approximately USD 94, yielding about 10%.
• New World Development / Nwdevl (Perpetuals & Senior): Perpetual bonds rose approximately 1pt and senior bonds gained approximately 0.5pts over week as market monitored prospect of repeat deal.

🌏 Asia Credit: Frontier & Sovereign

• Malaysia (Sovereign Sukuk): Priced two US dollar sukuk tranches: USD 850mn 5.75-year at T+15bp and USD 650mn 10-year at T+25bp. In secondary trading, both tranches widened approximately 1-2bp versus reoffer amid weak macro backdrop.
• Indonesia / Danatara (Sovereign Wealth Fund): Indonesia Investment Authority vehicle Danatara returned to market sounding investors for potential 20-year and 30-year issues to complement existing 5-year and 10-year bonds issued in June 2026.
• Pakistan (Sovereign): S&P raised long-term sovereign rating to B from B- during week. Curve closed -25 cents to +12.5 cents on Wednesday; activity showed hedge-fund selling against two-way real-money flows. Full week Pakistan curve closed approximately -50 cents to -1.63pts lower.
• Laos / EDF-Generation Public Company (SOE Debut): State-owned utility held investor meetings for debut US dollar Reg S/144A 5NC3 bond transaction. Expected issue ratings: CCC+ from S&P and CCC+ from Fitch.

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