Morning Commentary: U.S. jobs data disappoints; Pakistan picks up; some Ukraine bids get hit

By Christine Van Dusen

Atlanta, Feb. 5 – Trading of emerging markets assets was somewhat muted on Friday morning, due to the Asian holiday weekend, with much of the energy sucked away by disappointing non-farm payrolls numbers from the United States.

The jobs numbers – which showed that the U.S. economy added 151,000 jobs in January, falling short of the projected 190,000 increase – fell short of estimates. But “it feels like most people are hedged and positioned into it, and I guess we await our next cue for direction,” a trader said.

Oil prices were another factor on Friday, losing gains made earlier in the week.

“It felt like the market was trying to firm up and find a footing,” a trader said. “We open tighter, only to fade into the close.”

But “EM is still outperforming wider risk markets, as dollar longs continue to be unwound,” he said. “Given the pockets of positivity seen this week, we should start to see the supply tap finally turned on.”

Bonds from Pakistan were busier, with buyers seen for the 2019s and real-money investors picking up some of the 2024s and 2025s, another trader said.

“The curve is super-steep, with locals buying 2019s and leaving the Street short of bonds there,” he said. “We have 2016s maturing next month, so I expect locals will be looking to reinvest into the curve.”

Into the end of the week, sovereign bonds from Ukraine were mostly unchanged, with some better bids getting hit, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Quasi-sovereign banks actually managed to finish slightly stronger,” he said. “All eyes are still on the political space, as two technocratic ministers took back their resignations.”

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