Ukraine crisis possibly escalating but EM price action fairly firm - Deutsche Bank

FXStreet (Łódź) - Jim Reid from Deutsche Bank suggests that the turmoil in Ukraine will remain in focus in the nearest future, but at the same time he points out that yesterday's reports of an escalation of the conflict hadn't affected EM price action much.

Key quotes

"They found some support during the NY session with the Latam sovereign CDS closing modestly tighter (and off the opening wides) on the day."

"Asian sovereign CDS spreads are also moving tighter with China, Malaysia and Vietnam 1-2bp tighter overnight."

"On the cash side of things, Indo sovereigns are a touch lower overnight despite a very solid tone for US Treasuries on safe haven flows (UST 10yr now 2.465%)."

"The usual correlation between US rates and EM bonds have somewhat decoupled over the past day or so but our EM strategists’ view is that with valuations at supportive levels and the macro backdrop relatively benign, they don’t think a protracted selloff looks likely at this stage."

"Rather they see much of the recent sell off being technical in nature due to poor summer liquidity and exacerbated by a number of idiosyncratic events such as those in Russia. "