Morning Commentary: EM debt little changed; Qatar sees demand as holiday lull sets in

By Rebecca Melvin

New York, Dec. 14 – Emerging markets debt traded little changed in light action early Friday as a generally “tired” market looked to the weekend.

In the Middle East and Africa region, the market was “very dull,” with Qatar an outperformer on good demand, while the rest of the market was “tired and ready for the weekend,” a London-based trader said.

Qatar is one of the Gulf Cooperation Countries that will be added to the J.P. Morgan emerging markets’ U.S. dollar-denominated sovereign bond index in January. This change will increase the percentage of investment grade, higher credit quality, low spread names in the index, and is expected to dampen volatility.

“My outlook is that the EM sovereign credit spread will remain in a range,” a New York-based strategist said about 2019.

Heightened volatility has taken a toll on markets in recent weeks and now that the end of the year is in sight, many market players are coasting into the finish looking only to make minor tweaks in portfolios.

Given the seasonality, “any active investment decisions are going out the door at the end of this week,” the strategist said.

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