Morning Commentary: Volatility, limited liquidity for EM; Turkey, Jordan, Qatar National Bank eyed

By Christine Van Dusen

Atlanta, Nov. 9 – Emerging markets assets experienced some volatility on Monday – spurred by Friday’s strong economic data from the United States – and saw liquidity begin to dry up ahead of the Thanksgiving holiday.

“Looks like we could have a tricky week ahead of us,” a London-based trader said. “The rate-rise probability is up to 70% ... it feels like we are setting up for a bearish year-end in EM.”

The bond curve for Turkey, which weakened on Friday, is expected to continue to flatten this week, he said.

Investors were also keeping an eye on Jordan, which has $750 million in bonds set to mature this Thursday.

“The recent $500 million 2026 will become the only Jordanian bond outstanding,” another trader said.

Those notes, with a 6 1/8% coupon, priced last week at 98.155 to yield 6 3/8% via Citigroup and JPMorgan in a Rule 144A and Regulation S deal.

On Monday morning the notes were trading at 100.65 bid, 101.50 offered, he said.

In other news, the market was paying attention to National Bank of Greece, which recently announced its plan to sell its entire stake in Turkey-based Finansbank AG.

“[Qatar National Bank] is the most likely buyer in this process,” another trader said.

The deal could lead to a ratings upgrade for QNB and “substantial upside” of between 65 bps and 85 bps for holders of Finansbank’s 2017s and 60 bps to 100 bps for its 2019s, he said.

“Contrarily, execution risks could see another buyer stepping in or a further delay in the deal,” he said. “Both might lead to an initial widening in the bonds.”

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