Investor Presentation – Global EM Sovereign Credit Strategy: 2026 Mid-Year Outlook

Research evidence excerpt

Investor Presentation – Global EM Sovereign Credit Strategy: 2026 Mid-Year Outlook

Summary | Tight Club

Relative to our bullish 2026 outlook, higher UST yields are only partially offset by tighter spreads to leave full year 2026 return

forecasts lower at 5.9%, with another 3.9% from today mostly driven by carry. We see index spreads at 260bp by year-end. Our

overall stance is today also neutral HY versus IG, expecting there to be better opportunities to add risk in weak HY credits.

1. Still liking LatAm HY: We have like stances in Argentina (ARGENT 2041 cheapest) and Ecuador (ECUA 2040 cheapest), and see positive risk

reward in Venezuela (PDVSA front-end bonds cheapest) and Pemex (PEMEX 2050 cheapest).

2. CAC outperformance coming to an end: The long CACs structural trade now looks fully priced and the fundamental outlook is on balance

weaker than 6m ago driven by higher energy prices and less scope for fiscal improvement in the year ahead. We have Costa Rica and El

Salvador at dislike stances.

3. Still prefer CEEMEA energy exporters to importers with few exceptions: We think markets have done well to price a near-term re-opening

of the Strait already, leaving risk-reward negative for most importers. This includes Egypt and Kenya. Turkey however looks better priced

when factoring in a more manageable macro impact and we have moved to a like stance. South Africa and Ivory Coast also stay as like

stances.

4. Off-benchmark CEEMEA local trade still on: The off-benchmark local trade have underperformed versus their equivalent USD bonds

during the conflict yet we think macro fundamentals, positioning and valuations warrant holding onto positioning with positive returns

ahead, with Nigeria bills and Turkey FX our preferred local allocations.

5.