Market Overview: Spread/quality curve to flatten further.    Risk of market underpricing the prospect of tax reform and some hawkishFedspeaks drove US yields up and dollar stronger, causing some weakness inthe EM markets. But we expect inflows to continue and the spread/qualitycurve to flatten further, benefiting high-yielders, especially those with a goodstoryline.    Ukraine – Delayed, not derailed.    We remain constructive about the pension reform, and despite the delay, weexpect additional negotiations to pave the way for final approval this fall,which should help keep the IMF programme on track. We see Ukraine creditrating’s trend to be positive with a possible Moody’s upgrade early next year.    While next week’s Rada debate might cause volatility, we see low risk of asignificant selloff and would recommend ‘Buy on Dip’.    The recent steepening is justified by the issuance/buybacks. At the long end ofthe curve, 27s look expensive; we favor the 26s. We continue to see balancedrisk/reward in the Warrants at this point.    Egypt – Growth momentum on course.    Valuation of Egypt’s Eurobonds is slightly on the rich end of the scale, butlooking at the improvement in macro fundamentals, we are convinced thatvaluations are not overly expensive and perhaps they are already pricing inpotential positive rating actions. We remain constructive, but expectedissuance may cap bond prices in the near term. We recommend taking profitsfrom our recommendation of switching from the 40s to 47s. At the shorter endof the curve, 22s look substantially cheap to the 20s and 24s.    Ecuador – A bold move that might really pay off.    Ecuador remains a significant laggard in the distressed space this year. Theplebiscite called by President Moreno is a very bold move, with potentiallyhuge benefits (if he succeeds), or significant governability risk (if he fails). Welike his chance of success and hence stay constructive, but believe it prudentto wait for some more clarity on what questions will be asked in the plebisciteearly next week. The issuance risk has a capping effect on bond prices. On thebond curve, we restraint from adding risk at the long end at this point due tosupply risk. At the shorter end of the curve, the newly issued 23s is the mostattractive bond according to our term structure model.    Petrobras – Relative value update after the exchange.    We reiterate that the liability management transactions as credit positive dueto relief to debt amortization profile and a marginal reduction in interest rate.    We continue to favor the old bonds at Petrobras’ 10Y sector (and maintainswitching from 23s to 26s). We also recommend entering switching fromPetrobras 8.375% 21s to 22s.

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