Morning Commentary: Emerging markets firm as oil climbs; new South Africa bond trades higher

By Christine Van Dusen

Atlanta, April 8 – Emerging markets were firm on Friday morning as oil rallied, bolstering sentiment for risky assets.

“Today will be a relatively calm day in terms of economic data releases, but we await a bunch of rating decisions after market close,” a London-based strategist said. “Ahead of the IMF and World Bank Spring Meetings next week, the state of the global economy will inevitably shift into focus.

“Recent comments by IMF’s Lagarde indicate that the institution is going to lower the outlook on global economic growth ‘by a little bit,’ which, however, shouldn’t pose a surprise to many.”

Also coming up is the OPEC and non-OPEC meeting in Doha, scheduled for April 17, he said.

“It can be expected with near certainty that Iran is not willing to keep output at current levels,” he said. “The crux of the matter is therefore whether the other producers are able to compromise nonetheless.”

Against this backdrop, the new issue of notes from South Africa – $1.25 billion 4 7/8% notes due 2026 that priced Thursday at 98.631 to yield 5.051%, or Treasuries plus 335 basis points – saw some activity in trading.

Early in the session on Friday, the notes were seen at 98.875 bid, 99.125 offered, a trader said.

Citigroup Global Markets, Rand Merchant Bank and the Standard Bank of South Africa were the lead managers for the Securities and Exchange Commission-registered deal. The co-lead manager was Investec.

“The announced offering comes just one day after the downward revision on economic growth by Standard & Poor’s, where a downgrade to junk is looming,” the strategist said. “A downgrade either in June or December seems to remain a substantial threat. In the short-term, we expect political noises to remain a significant driver for the rand and South African credit.”

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.