Senior Credit Analyst - Emerging Markets, EM Spreads

Leandro Gubler

Senior Credit Analyst - Emerging Markets

EM Spreads

Credit

<ul>
<li>Brazil is a carry credit, not a compression story. External strength limits downside, but fiscal drift and election-year reform risk cap upside.</li>
<li>We initiate at Neutral. Tight front-end spreads and fair belly valuations argue against Overweight, while reserves, local funding depth and carry argue against Underweight.</li>
<li>We prefer the 2036s, with 2035s close behind. Use 2030s/2031s defensively, avoid 2041s, and keep 2045s/2047s as higher-beta satellites.</li>
</ul>


Brazil is a carry credit, not a compression story. External strength limits downside, but fiscal drift and election-year reform risk cap upside.
We initiate at Neutral. Tight front-end spreads and fair belly valuations argue against Overweight, while reserves, local funding depth and carry argue against Underweight.
We prefer the 2036s, with 2035s close behind. Use 2030s/2031s defensively, avoid 2041s, and keep 2045s/2047s as higher-beta satellites.


Brazil Sovereign Debt: External Strength, Fiscal Drift

United States

iShares MSCI Brazil Small-Cap ETF is an exchange-traded fund incorporated in the USA. The ETF seeks to track the performance of the MSCI Brazil Small Cap Index Fund.

iShares MSCI Brazil Small-Cap (EWZS US)

Brazil Sovereign Debt: External Strength, Fiscal Drift

Brazil’s external strength supports carry, but fiscal drift caps compression; Neutral, with the 2036s preferred and 2035s close behind.

Leandro Gubler