Plot Twist, But No Change In View

Morgan Stanley maintains a constructive outlook on Emerging Markets (EM), favoring local currency bonds and FX strength despite volatility. The strategy emphasizes a diversified funding approach to navigate the current USD cycle.

Key Takeaways

• 1.EM local currency bond yields have not fallen in line with energy prices.
• 2.Bullish view on EM currencies vs G3 funding currencies.
• 3.Fed on hold this year should support EM central bank dovishness.

Table of Contents

• Key Takeaways
• Must reads from Global EM Strategy
• Global EM Strategy
• Local markets trades overview
• Why are yields not lower?
• Stay Long EM vs Basket
• What can we say about positioning?
• Required reading
• Trade Table
• Local Markets Snapshots
• Valuation Methodology and Risks

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