Morning Commentary: EM debt improves as investors eye jobs report, OPEC oil supply cut

By Rebecca Melvin

New York, Dec. 7 – Emerging markets debt was closing out the week a bit better than where it started as investors digested Friday’s U.S. jobs report and the OPEC and Russia’s agreement to cut production.

The jobs report is a key data point for the U.S. Federal Reserve in setting rate policy. The November payrolls report on Friday showed that hiring slowed, with 155,000 jobs added, which was below consensus expectations and lower than October and on a year-over-year basis. Wage growth was little changed, with average hourly earnings rising 3.1%, and the unemployment rate was unchanged at 3.7%, the Labor Department said.

“Though disappointing expectations, payrolls growth remains solid and above the Fed’s estimated break-even rate; we expect prints closer to November’s pace than October’s going forward,” U.S. economists Andrew Schneider and Joel Alcedo of BNP Paribas wrote in a note published Friday morning.

The Organization of Petroleum Exporting Countries and Russia on Friday agreed to cut production by 1.2 million barrels per day, a significant reduction. The agreement was still under negotiation at Prospect News’ deadline. But the initial news boosted oil prices.

West Texas intermediate crude was last up $2.25, or 4.4%, to $53.77 per barrel on the New York Mercantile Exchange, and Brent crude was up $3.36, or 5.6%, to $63.41 a barrel on the London Intercontinental Exchange.

Oil still has a lot of catching up to do since a sharp drop beginning in October. Likewise, EM debt may be a bit better on the week, but it remains at depressed levels compared to where it had climbed by the end of September.

But Mexico City Airport’s bonds were weaker than they were earlier in the week when they jumped after Mexico’s Ministry of Finance and Public Credit announced a buyback was being launched for up to $1.8 billion of the bonds for 90 per bond.

Mexico City Airport’s 5½% bonds due 2047 were down to about 82.5 after pushing up to 83.9 on Tuesday.

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