Chart of the Week: Sovereign Fragility – Echoes of ‘94

Fathom’s Sovereign Fragility Index (SFI) – an objective measure of fundamental sovereign credit risk across the world’s major economies – was updated for 2018 Q1 last Friday and is now available on Thomson Reuters Chartbook.

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Three countries saw their fragility increase from already high levels on the quarter: in order, these were Russia, Turkey and South Africa. That pattern of increasing fragility is reminiscent of the period of Fed tightening after 1994, when capital began to flow back into the US, triggering a wave of sovereign crises across emerging economies. Greece remains the most fragile in a fundamental sense, though there is nothing to be concerned about here unless and until the ECB’s ‘whatever it takes’ stance shifts materially. Argentina and Brazil also have elevated levels of fragility, but they have not deteriorated recently.

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