Argentina’s bond rally, fiscal & rate risks, Mexico outlook

Optimism about Argentina’s policy shift has driven the spreads on sovereign dollar bonds to their narrowest level in over five years, but there’s no sign that policymakers will address the overvalued peso, which is needed to sustain an economic recovery. Fiscal worries elsewhere are clearly concerning central banks, resulting in a smaller-than-expected rate interest cut in Colombia this week and a likely step up in the pace of tightening in Brazil next week. Otherwise, all eyes will be on the US election, the outcome of which could have particularly large ramifications for Mexico’s economy.