EM primary stalls; secondary little changed in light volume; market eyes restart in September

By Rebecca Melvin

New York, Aug. 18 – The emerging primary market remained quiet on Friday as has been the case for the entire week in the face of increased volatility in the financial markets and as the typically slow August period drags on.

Given the lull, market players were left to begin thinking about September, when market activity normally resumes after the U.S. Labor Day holiday.

“It’s still quiet in the primary markets for the next two weeks, but expect it to be busy from Sept. 4 onwards,” a London-based syndicate source said on Friday.

Emerging secondary markets were also quiet this past week with little movement in terms of pricing or spreads.

An outperformer in terms of spreads this week was the sovereign debt of El Salvador, which saw its credit tighten by 35 to 55 basis points amid investor hopes pinned on potential pension reform, according to MUFG Securities’ analyst Trieu Pham. Other bright spots included Argentina’s 2027 notes, which tightened by 30 bps and Iraq’s newer 2023 notes, which tightened by 25 bps.

EPFR Global reported a $166 million outflow for EM hard-currency bond funds for the week ended Aug. 16. For all EM bond funds, there was a $56 million outflow for the week, compared to a $1.29 billion inflow for the previous week. Local currencies saw an outflow of $51 million.

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