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Trade ministers from the dozen Pacific nations in the Trans-Pacific Partnership |
In late September Daniel Tenengauzer, RBC’s head of emerging market and global FX strategy, was taking a step back to explain to Euromoney why he believed the widening spreads of emerging market credit default swaps, which had risen close to their post-crisis highs, would keep going higher.
“The key question is, are we at the top of the range we have had for the past three years or are we going to break through? And my opinion is that we are at the bottom of a new range,” he explains.
Tenengauzer outlined three reasons for his hypothesis, and they were all related to physical, real-economy factors. First, the decline of economic growth in Europe – important for trade because the European economy is more integrated into global trade flows than the US. The second was China’s slowdown and the drag that is having on commodity prices.
“And last but not least – and one that won’t be resolved in the near term – is a lack of new trade agreements,” he argued. “We shouldn’t forget that the [commodity] super cycle began around 2001 after China officially joined the WTO (World Trade Organization).
