Morgan Stanley(US:MS)2025-06-10 02:16Investment Rating - The report maintains a bearish view on the USD, recommending short positions against CLP, TRY, and KRW [10][20]. Core Insights - The report expresses cautious optimism for major Latin American economies, particularly favoring Brazil's rates while indicating that Mexico's valuations are less attractive [3]. - In Asia, the report anticipates that USD weakness will support AXJ currencies, although gains may be tempered by slowing global trade [4]. - The report expects EM bonds to deliver decent total returns but to underperform Treasuries, with EM currencies gaining against the USD but lagging behind other safe havens [5][64]. Summary by Sections Latin America - The report highlights Brazil's nominal and real rates as favorable, while expressing caution regarding Mexico's valuations [3][62]. - A short USD/CLP position is recommended due to strong macroeconomic fundamentals and potential political developments [48][51]. Asia - The report suggests that AXJ currencies will appreciate due to USD weakness, with a focus on idiosyncratic stories amid potential shifts in monetary and fiscal policies [4][67]. - Long KRW positions are favored based on supportive macro factors, despite acknowledging risks of a near-term rebound in USD/KRW [35][39]. Global EM Fixed Income - The report anticipates a rally in EM fixed income, driven by a disinflation process across regions, although it notes significant uncertainty in the US and a global economic slowdown [5][64][68]. - It projects local currency index bond yields to drop around 20 basis points by year-end, with expectations for US Treasuries to fall by about 50 basis points [21][22].