Rising funding costs, trade tensions, idiosyncratic problems and politics have affected the growth outlook in Latin America since the start of the year.

The sell-off in the bond market came faster and was larger than many expected in the first half.

However, it is hard to argue that Latin American bonds as a whole look particularly cheap as credit spreads have moved closer to fair levels but not cheap territory, in our view.

At this juncture, we believe that investors looking for sovereign exposure in the region should consider medium-term debt of Mexico and Brazil, which provide a good balance between decent return and reasonable risk at a time of challenging external conditions for emerging markets.

Latin American bonds have sold off substantially since the start of the year, as the growth outlook for the region has become less certain with rising funding costs and trade tensions.

While we do not see overall valuations as cheap, we think investors can find selected opportunities in Brazil, Mexico and, to a lower extent, Argentina.

Any opinions expressed here are the author’s own.

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