Morning Commentary: Asian bonds soften; Turkey, China oil bonds under pressure; Brazil in focus

By Christine Van Dusen

Atlanta, Aug. 17 – Asian bonds were softer and notes from Turkey were under pressure on a low-liquidity Monday morning for emerging markets assets.

“Monday has been a characteristically quiet summer session so far,” according to a report from Barclays. “Market attention shifted back to stronger United States growth and the prospect for near-term Fed tightening.”

High-grade cash bonds from Asia finished the early session unchanged to 2 basis points wider, a London-based trader said.

“Crude continued to go lower, but China oil [bonds] managed to open unscathed,” he said. “However, post-London open we did see some pressure, and spreads closed a couple bps wider.”

Malaysian bonds moved as much as 8 bps wider, with credit default swaps spreads widening about 7 bps to 180 bps, he said.

“India announced plans to overhaul their public sector banks,” he said. “Equities were up while credit was roughly unchanged.”

From Indonesia, most sovereign cash bonds held in well on Monday morning but the 2024s got “hammered,” another trader said.

“Dealers running light following the buy flow late last week,” he said.

Meanwhile, Turkey’s bond market was under pressure as political uncertainty hurt demand, according to a report from Schildershoven Finance BV.

“We expect some further price decline, as the prospects of recovery are cloudy,” the report said.

Bonds from Ukraine entered the week with some selling of corporates while quasi-sovereigns remained quiet following the conclusion of debt talks in San Francisco, said Fyodor Bagnenko, a fixed income trader with Dragon Capital.

Ukrainian bonds are expected to trade relatively flat until a final decision on debt restructuring is made, market sources said.

Looking to Brazil, the bond market continued to grow “as the latest demonstrations were not as big as expected, and as more and more social and business groups have voiced support for the government’s economic course,” Schildershoven said.

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