Further Yield Compression Unlikely

Following the arrest of alleged drug kingpin Christopher 'Dudus' Coke on June 22, the worst of the violence in Kingston, Jamaica's southern capital seems to be over. This has been reflected in the debt markets, where we have seen Jamaica's US$ Global 25 bond fall from a peak of around 9.8% to 8.8% at the time of writing. However, even though investors' confidence in the ability of Jamaica to service its external debt has improved, we caution that elevated sovereign risk as a result of the recent violence and increased global risk aversion owing to the unfolding debt crisis in Europe may hold back further gains towards 8.2% levels seen in April.

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