EM performs as payrolls increase in U.S., oil prices rise; South African spreads tighten

By Christine Van Dusen

Atlanta, Aug. 5 – Emerging markets investors on Friday were somewhat buoyed by better oil prices and spent the session digesting the news that the United States experienced a larger-than-expected increase in payrolls, a rise in wages and a flat jobless rate.

If the numbers had missed estimates, that could have raised “doubts about U.S. and global economic growth,” a London-based analyst said.

But an aggressively strong number could “increase the likelihood of a hike in the nearer term,” he said. A gradual pace of hikes “would likely also be the most accommodative for EM risk, which furthermore benefits from easing in other developed markets, which have translated to lower rates.”

In news from Latin America, the Brazilian impeachment committee in the Senate voted to continue the impeachment process against Dilma Rousseff.

“On August 9, the full Senate will make a decision whether it should consider Rousseff’s impeachment,” the analyst said. “If the chamber decides against the president, the final vote is expected in August 25 and 26.”

Looking to South Africa, the African National Congress remained in the lead for local governmental elections, the analyst said.

In response, the rand has been outperforming, and five-year credit default swaps spreads have been spotted at about 5 basis points tighter, he said.

Meanwhile, dollar bonds from Asia traded in “positive territory,” according to a report from Schildershoven Finance BV. “Malaysian and Indonesian 10-year bonds are higher by 16 bps and 50 bps, respectively.”

Ukraine strengthens

From Ukraine, sovereign bonds have traded well into the end of the week, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

The curve added a ½ point to ¾ point on good bids at the short end, he said.

“Quasi-sovereign banks mirrored the move and even outperformed, rising by ¾ point to 1 point as recent supply was taken out,” he said. “Corporates were mixed.”

Tunisia prices bonds

On Thursday, Tunisia priced a $500 million issue of notes due Aug. 5, 2021 in a transaction guaranteed by the United States Agency for International Development, according to a press release.

The notes came to the market with a coupon of 1.416%.

JPMorgan and Goldman Sachs were the bookrunners for the deal.

The deal drew an order book of more than $3 billion.

Other details were not immediately available on Friday.

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