Yvette Babb of William Blair on valuations in Nigeria, Kenya, Ghana, and Egypt
Aug 25, 2023
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Yvette Babb of William Blair shares insights on the recent sell off of SSA sovereign bonds, discussing valuations in Nigeria, Kenya, Ghana, and Egypt. The podcast also analyzes economic situations in Nigeria and Kenya, as well as factors influencing valuations in Sub-Saharan Africa and North Africa. Egypt's debt default risk and potential IMF support are also discussed.
The podcast discusses the poor August performance, volatility in US Treasuries, and mixed growth dynamics in the US as factors affecting market sentiments.
The podcast presents insights on Nigeria's Euro bonds, highlighting the impact of inflation and the need for tactical consideration of high yield compression.
Deep dives
Top-down macro views and cautious market sentiment
The podcast episode discusses top-down macro views driving market performance in emerging markets. It highlights the poor August performance, volatility in US Treasuries, and mixed growth dynamics in the US as key factors affecting market sentiments. The conversations in London revealed a low level of conviction and a cautious tone among traders and sales desks. Common themes included the mixed income codes, volatility in US Treasuries, and the impact of mixed data on global growth outlook. While some were looking for opportunistic trading, there was no strong view on market stabilization and conducive risk environment.
Inflation and the case of Nigeria's Euro bonds
The podcast explores the topic of inflation and its impact on Nigeria's Euro bonds. It mentions that Nigeria's median policy rate of 7% is down from this year's peak, but still higher than the post-COVID level. As of June, the median inflation rate across the universe fell to around 5.8%, providing an opportunity to uncover tractable opportunities. The discussion also focuses on the Nigeria 47s Euro bonds, which initially rallied due to Tanubu's reform agenda. However, signs of waning reform momentum led to downgrading them to hold. The podcast emphasizes the need to be tactical when considering high yield compression and compares Nigeria's valuations to its peers.
Kenya's short-term and long-term view
The podcast presents insights on Kenya's dollar bonds, discussing their strong performance up until June and recent selling pressure due to external financing needs and increased risk of fiscal slippages. The government's commitment to fiscal consolidation is highlighted, with clear resolve to increase revenue mobilization. Despite concerns about potential slippages, the fiscal numbers are considered better than the past decade. The IMF's support and expected financing flows from various sources are seen as factors that could help improve Kenya's credit story. The discussion also mentions the challenge of liquidity and the need for meaningful improvement in the availability of dollars in the domestic market.
Yvette Babb, local and hard currency portfolio manager at William Blair, joins host Rizwan Mahmood for a chat on the recent sell off of SSA sovereign bonds. Yvette shares her insights on Nigeria, Kenya, Ghana, and Egypt and talks about where valuations are at today. We were delighted to have Yvette join us at Tellimer in London for our first in-person recording. Edited and produced by Ella Ryan.
For more emerging and frontier market content, make sure to follow The Emerging Markets Podcast by Tellimer, the single point of entry to EM/FM research and data.
The Emerging Markets Podcast dives into a range of topics in the emerging and frontier market world including investment themes, debt restructuring, elections, and geopolitical tensions.
This podcast is provided for information purposes and represents the personal opinions of the speakers. It is not an offer or solicitation for investment in any securities, nor should it be regarded as investment advice. Tellimer Limited does not offer or provide personal advice and no mention of a particular security in this podcast constitutes a recommendation to buy, sell or hold that or any security, portfolio of securities, or enter any transaction or investment strategy. Nor is any such mention an indication that any investment is suitable for any specific person.
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