Morning Commentary: Emerging markets quiet though ‘supportive’; Turkey’s Vakifbank higher

By Colin Hanner

Chicago, May 30 – The long holiday weekend opened to mostly quiet activity in emerging markets on Tuesday, a market source said, with bonds on the whole mostly unchanged from Friday’s levels.

Yet, with another week of inflows in emerging markets, the arena as a whole looks supportive, a market source said, adding “it feels like a good window for supply ahead of the summer lull.”

The trajectory of U.S. Treasuries and nonfarm payrolls, which are due out on Friday, have the potential to tighten bonds, the source said.

Turkiye Vakiflar Bankasi TAO (Vakifbank) was quoted with a 100 bid in its recently priced 5 1/8% notes due 2022, a market source said.

The notes launched at 99.893 and had been as low as 99½ after pricing.

“[It was] a firm start in Turkey, with buyers of bank paper trickling in from the open,” a market source said.

In Latin America, Brazil’s bonds were “only marginally changed from Friday,” a market source said, adding flows were extremely light.

The 4¼% notes due 2025 were quoted at 98.55 bid, 98.95 offered, and the 7 1/8% notes due 2037 were quoted at 114.35 bid, 115.35 offered.

With details continuing to unfold out of Brazil’s political landscape – with president Michel Temer allegedly involved in a bribery scandal – elsewhere in the emerging market space seems unlikely to feel any tremors.

“Sure, there are pockets of concern like Brazil, but the contagion resulting of a general risk-off move feels unlikely,” a market source said.

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