EMEA local rates could outperform but levels not yet attractive enough

On average, EMEA still appears to be somewhat less sensitive to the global EM rout and the newsflow is quite limited in the days ahead. It should not change the global EM mood and highlight the ongoing divergences within the region.

"EMEA local rate levels are not attractive though. With lower commodity prices and growing concerns regarding EMEA growth, further flattening would be expected. That said, any confirmation of a Fed rate hike in September could cap this flattening and lead to a 5Y sector underperformance like in 2013-14", says Credit Agricole.

PMIs in Central Europe should confirm the economic recovery after a buoyant German reading last week. CE4 assets are continued to be overweighed. The strong resilience during Monday's EM sell-off was surprising though, especially for Hungarian assets. 

"Therefore, Polish assets would be favored over Hungary. Likewise, the CZK is not close enough to the 27.00 floor and a move is expected towards 27.20 in the near term", added Credit Agricole.