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Agencies' sovereign ratings and sovereign spreads in the CDS markets have remained relatively stable over the past year despite the current pandemic crisis and the large fiscal and economic activity deterioration, mainly due to the unprecedented support from fiscal and monetary policies
Further improvement of sovereign risk measures across the board, driven by a protracted search for yield, against the background of supportive central bank policies, together with better incoming cyclical data, muted inflation and some de-escalation of global uncertainties (trade war)
In recent months we have witnessed a notable compression in sovereign CDS at the global level, in an economic scenario that is full of uncertainty and in which public debt is at an all-time high.
The search for yield and looser monetary policies across the board, favor sovereign spreads compression, despite a worsening global outlook, poorer incoming data and balance of risks, and the lack of improvement of fiscal disequilibria.
Against a background of increasing concerns on economic cycle strength and uprise of global trade tensions, the central banks' more dovish tone helps that financial tensions and global risk aversion remain bounded.