Diary of a Financier

Turning Bullish on Emerging Market Bonds

In Capital Markets on Tue 1 Mar 2011 at 11:32
  • Waiting for a bullish turn in the price-trend of EMB to enter a long position, but indicators are now bullish.

Overnight, I caught a few headlines about emerging market inflation, and signs point to cooling.  Thai & Indonesian inflation was lower than expected, then Chinese PMI showed a notably steep decline.

This isn’t a commentary on my future inflation outlook for emerging markets, but I’m preparing to go long Emerging Market Bonds (EMB).  I’m just waiting for a price uptrend to resume in the weekly chart, but indicators already portend a bullish outbreak:

EMB daily- support @ 105 held strong, and a base has been hammered out. Indicators are positive and bullish divergence awaits confirmation by the price trend.

I don’t know how long this can run yet, but I see the potential to reap a few points and a dividend or two.

I caught emerging market inflation right on the turnbuckle of EMB declines back in 4q10, then added a long/short pair of EMB/EEM in November.  I closed that pair per my 2011 Outlook, which also nailed the subsequent activity in the Emerging Markets.

–Romeo

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