An Uneven Playing Field

Research evidence excerpt

An Uneven Playing Field

Global Idea

July 20, 2026 02:28 PM GMT

Morgan Stanley & Co. LLCMEM Sovereign Credit Strategist Simon Waever

Strategist

An Uneven Playing Field Simon.Waever@morganstanley.comMorgan Stanley & Co. International plc+ +1 212 296-8101

Neville Z Mandimika

Contained index moves continue to mask elevated dispersion StrategistNeville.Mandimika@morganstanley.com +44 20 7425-2509

across countries, with the Iran conflict, El Niño and US

Morgan Stanley & Co. LLC

hyperscaler issuance all important drivers that we review. We Emma C Cerda

still see most value in lower-rated LatAm HY and select higher- StrategistEmma.Cerda@morganstanley.com +1 212 761-2344

quality CEEMEA HY but with plenty RV opportunities.

Morgan Stanley India Company Private Limited+

Guru Sharan Agrawal

StrategistKey Takeaways

Guru.Sharan.Agrawal@morganstanley.com +91 22 6995-3035

The Iran conflict escalating would likely see the overall index spreads widening

given the limited risk premium currently priced in, with CEEMEA HY oil importers

and the CAC region most at risk, while Ecuador, Venezuela and Nigeria offer more

favorable risk-reward.

El Niño is a clear risk in 2H26 yet is hard to trade at an index level. It reinforces

our dislike stances on Peru and Costa Rica. It's a potential headwind for Colombia

and a key risk to our like stance on Ecuador. It reinforces our like stance on

Argentina.

US hyperscaler issuance is starting to impact US spreads, yet we think the impact

on EM remains contained. It can however start taking away demand from the

longer end tight trading EM IG bonds given increasingly flat curves on a relative

basis.

Across LatAm, relative value favours Argentina versus Ecuador near term,

although we still like both, Mexico versus Brazil, Guatemala versus Costa Rica,