Blog

Our Experts Comment the Times Series

See All the Comments
rss

Blue Price Action

03 November 2020 by jbchevrel

EM CDS had a strong day today. The constituents of CDX EM s34 were tighter up to -30bp (Argentina). The CDX EM s34 fair value tightened by -6bp in aggregate. South Africa CDS was tighter -12bp. Saudi Arabia and Brazil CDS were both tighter by -7bp. Russia CDS was tighter by -6bp. The weaker dollar across the board surely helped that move in CDS (RUB +1.5% ZAR +1.0% CLP +1.7% - vs $) along with a renewed strength in some base commodities. Indeed, crude oil WTI benchmark pushed up +4%, rebounding +14% since Monday early morning lows ($33.6/bbl.). Crude strength early this week was firstly attributed to increasing signs that the ‘OPEC+’ extended cartel will delay a planned tapering of oil output cuts. From the end of Dec20 to the end of Mar21. Some members within the alliance, unsurprisingly led by the Saudis, even want to push for deeper cuts. Lower dollar, also a positive for commodities, was based on expectations that the US policy mix with Biden president will be easy. As the latest polls came in, it became clearer for markets that no final shift has occurred between President Trump and VP Biden, contrary to what we had seen in 2016. The price action we see today (CDX EM -7bp) suggests that markets are anticipating a decisive result tonight. This is not guaranteed, given the tight leads in some of the key states