Ukraine, Greece take positive steps, sentiment improves; Asian bonds strengthen

By Christine Van Dusen

Atlanta, Feb. 13 – Investors on Friday remained focused on Ukraine and Greece as leaders hammered out agreements that could lead to more stability for the embattled sovereigns – political for the former and financial for the latter.

Some market-watchers were encouraged by progress between Greek and European negotiators, who seem closer to agreeing on a deal related to Greece’s bailout.

“Risky assets in Europe are firmer today as a result,” according to a report from Barclays Capital.

And the ceasefire in Ukraine was still scheduled to take effect on Sunday, which also boosted some emerging markets bonds.

“Investors will likely form into two groups – those who think this is the beginning of the end of the Ukrainian conflict, and Russian sanctions as a result, and those who think that the Minsk II agreement is destined to fail just like Minsk I,” a London-based analyst said. “The rest of [emerging markets] benefited from the agreement and better risk tone.”

Russian credit default swaps spreads ended the week 35 basis points tighter, with the strongest moves occurring alongside Wednesday’s and Thursday’s negotiations.

“In the sovereign curve, certain front-end bonds performed particularly well, up to 74 bps tighter,” He said. “Russian banks were 53 bps tighter on the week.”

Bonds from the Middle East were mostly mixed during the week, the analyst said.

Bonds from Asia put in a strong session by Friday, closing a busy week of buying and spread-tightening for high-grade names.

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