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Bond markets had a strong week to end February with US Treasuries leading the way. PCE inflation in the US for January printed in line with expectations, helping to bring forward expectations of rate cuts from the Federal Reserve to the June FOMC meeting. As of the start of March, markets are pricing in 67bps of easing by the end of 2025 compared with 45bps of cuts a month ago.
Amid that trend higher in US Treasuries, emerging market bonds had a positive week. Bloomberg’s broad index of USD-denominated EM bonds added 0.9% last week, taking its year-to-date gains to 2.7%. GCC bonds outperformed the broader EM universe with a gain of 1.1% last week and pushing ytd moves to 2.3%. Broken down by issuer class, investment grade bonds were the leader last week, up 1.2%, while sovereigns added slightly less and sukuk added 0.7%.
By country, Qatar was the strongest performer with a 1.4% rise in its index. The UAE bond index added 1.1% and the Saudi market was up 1.2%. Bloomberg’s index of Turkish bonds added 0.9% last week while Egyptian bonds gained 0.7%.
In major macroeconomic highlights for the region, Turkey’s economy expanded by 3% y/y in Q4 2024, stronger than expectations and an acceleration from the 2.2% recorded in the previous quarter. Inflation in Turkey decelerated to 39.05% y/y in February from 42.1% in January. The monthly inflation print for February also slowed sharply to 2.3% m/m from 5.0% a month earlier, raising the prospect of additional easing from the central bank.
Moody’s raised their sovereign rating on Tunisia to ‘Caa1’ from ‘Caa2’ and kept the outlook for the rating stable. According to the rating agency, Tunisia faces a lower debt amortization schedule and a more comfortable external financing position over the next several years.
Selected new issuances in the last week include:
Edward Bell
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