Morgan Stanley Fixed-EM Sovereign Credit Strategy Rich Cheap Watch-110269207

M UpdateEM Sovereign Credit Strategy | Global Rich & Cheap WatchMorgan Stanley & Co. LLCSimon WaeverStrategist Simon.Waever@morganstanley.com +1 212 296-8101 Morgan Stanley & Co. International plc+Pascal N BodeStrategist Pascal.Bode@morganstanley.com +44 20 7425-3282 Morgan Stanley & Co. LLCEmma C CerdaStrategist Emma.Cerda@morganstanley.com +1 212 761-2344 Morgan Stanley & Co. International plc+Neville Z MandimikaStrategist Neville.Mandimika@morganstanley.com +44 20 7425-2509 EM Sovereign Market Composite Sovereign Ratings and Market Pricing – IG and BB Sovereign Valuations Bond 5s10s Curves Snapshot EUR vs. USD Bonds Snapshot CDS Snapshot ESG Snapshot Defaulted Bonds Overview Country Bond Curves 10Y sovereign bond spreads widened by 22bp in the past week (1W), and EMBIG-D widened by 3bp. Spreads widened across all rating categories. Region-wise, spreads widened the most in SSA and the least in Asia. Country level: The cheapest countries based on 6m Z-scores across each rating category are currently United Arab Emirates, Romania, Trinidad and Tobago and Zambia. The richest are China, Hungary, Paraguay and Bahrain. 5s10s spread curves: IG curves flattened by 2bp to 23bp and HY curves flattened by 1bp to 51bp in the past 1W on aggregate. On an absolute basis, Egypt, Ivory Coast and Brazil are the steepest curves. On a 6m Z-score basis, China, Uruguay and the Dominican Republic are the steepest, while Hungary is the flattest. See page 13.10s30s spread curves: IG curves flattened by 2bp to 24bp and HY curves flattened by 2bp to 39bp in the past 1W on aggregate. On an absolute basis, South Africa, Jordan and Sharjah have the steepest curves. On a 6m Z-score basis, Brazil, Bahrain and Chile are the steepest, while the Dominican Republic is the flattest. See page 14.The CDS-bond basis: The CDS-bond basis decreased by 10bp to -88bp in the past 1W. On an absolute basis, Egypt decreased the most while Peru decreased the least over the past 1M. See page 16.Exhibit 1:10y EM sovereign bond valuation summaryCategory SpreadOutright Z-Score (6M)Vs. index Z-Score (6M)CountryCurrent SpreadSpd. Vs. CategoryZ-score (6M)CountryCurrent SpreadSpd. Vs. CategoryZ-score (6M)By RatingA & Above751.3-0.4United Arab Emirates62-121.4China4-71-1.4BBB1522.3-0.3Romania219672.2Hungary1575-1.2BB2421.10.0Trinidad & Tobago218-242.1Paraguay162-80-1.3B & non-distressed CCC6041.80.2Zambia661562.0Bahrain271-333-2.1By RegionLatAm1701.3-0.2Trinidad & Tobago218492.0Chile92-78-1.3Central & North America3491.60.9Honduras4991502.1El Salvador750401-1.5Europe2550.4-0.3Romania219-361.6Tajikistan512256-1.0SSA6491.72.4Zambia661111.9Ivory Coast404-246-1.8MENA2281.20.2Egypt6844561.6Bahrain27143-1.6Asia2781.70.5Pakistan8255461.2China4-275-1.9Cheapest Country Within CategoryRichest Country Within CategorySource: Bloomberg, Morgan Stanley Research Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research.