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Banco Santander Brasil has sounded a broad bullish tone on LatAm bonds among emerging markets. They said that LatAm was the only “investable” bloc among developing nations given the relatively higher interest rates in the subcontinent as compared to other regions. It said, “There is optimism for LatAm in the medium and long-term in the region when it comes to investment flows”. They highlighted that the US rates nearing its peak should see LatAm bonds and currencies outperform. They noted that risk premiums were unattractive in China and other Asian markets. In particular they highlighted Mexico amid its nearshoring process, wherein companies from the rest of the world have moved to the south of the US, that has helped increase foreign investment and maximize production. Mexico’s foreign direct investment rose 48% in Q1 with investments into the country rising by $18.6bn during this period. On the attractiveness of Mexico, Santander said, “It means GDP potential, investment and a stronger exchange rate”. They also were bullish on Colombia noting that it offered the largest risk premia in the LatAm region amid due to inflation risks and continued rate hikes. .
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