EM sees better selling after Fed data; Turkey firm; Icici widens slightly; Brazil softens

By Christine Van Dusen

Atlanta, Aug. 7 – Emerging markets issuers saw better selling of longer-dated bonds on Friday in response to the news that the United States added 215,000 jobs in July, raising the likelihood of a rate hike from the Federal Reserve in September.

Buyers emerged for short-dated defensive credits, but overall, liquidity was thin and emerging markets assets continued to closely track commodity movements, a trader said.

“Turkey banks' short-end trading was firm,” he said. “Even with the Street chasing credit default swaps higher, there was selling of the Turkey sovereign’s belly and long end.”

Asian bonds opened quietly on Friday, given that Singapore was on holiday and Taiwan was preparing for a typhoon that was passing through the region, a London-based trader said.

“Investment-grade cash gave back some of yesterday’s gains, with spreads closing 1 basis point to 3 bps wider,” he said. “Korea 10-year quasi-sovereigns remained heavy.”

India-based Icici Bank Ltd.'s new issue of 3 1/8% notes due in 2020, which priced at Treasuries plus 160 bps via HSBC, Barclays, JPMorgan, BofA Merrill Lynch and Standard Chartered in a Regulation S deal, was a touch wider on Friday.

The notes moved to 160 bps bid, 157 offered, he said.

“The short end remains very well-bid,” he said.

Other corporates, particularly those with a 10-year tenor, saw some demand, he said.

From Latin America, low-beta spreads were mostly unchanged on Friday afternoon, with five-year credit default swap spreads closing at 333 bps from 332 bps, a New York-based trader said.

Mexico’s CDS was unchanged at 137 bps, he said.

Brazil sees more volatility

Brazil's bonds experienced volatility alongside currency movements and risk markets in general, a trader said.

“Cash prices didn't do much, as liquidity was thin, although we did feel a touch softer despite the rally in the back end of the Treasury market,” he said.

Meanwhile, high-yield names from Latin America finished the day about flat to Thursday, with PDVSA's 2017s inching to 64.65 from 64.50 and Venezuela's 2027s staying at 39.

“Flows are light, as has been the case on summer Fridays, with some better sellers of high-grade EM paper seen,” he said.

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