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JPMorgan Keeps Debt Technicals Positive
25 Jun 2007
JPMorgan is keeping its view of debt market technicals at positive following a June 18-20 survey of 253 investors managing $451 billionn in EM fixed income and FX assets. "External debt remains well supported due to buybacks, high cashflows and low sovereign issuance," says the shop. JPM notes a fall in cash balances and an increase in local markets allocations as a percentage of portfolios. "This is where marginal risk is going, especially as UST have weakened," says the shop. At the country level, reductions were seen in Venezuela, which JPM revises to tech positive and increases in Brazil, following a partial unwind of last month's sharp drop. JPM estimates July coupon and amortization payments of $5 billion, YTD strategic inflows at $8.5 billion and retail bond fund inflows of $5.2 billion, using EPFR Global data. JPM meanwhile cut its inflow forecast for the full year 2007 to $25 billion from $30 billion. It says Argentina has the most to issue in 2007 amongst sovereigns. "The $9 billion estimated remaining external debt sovereign financing requirements is more than adequately covered by the $24 billion in coupons and amortizations from EMBI Global and EURO EMBI Global bonds in the remainder of the year," JPM concludes.