Market decline keeps EM assets weak; bonds sell off; wider spreads for India, Korea, Lat-Am

By Christine Van Dusen

Atlanta, Aug. 24 – Risky assets, particularly those from Asia, remained weak on Monday as stocks and commodities continued to plummet on concerns about China’s economy.

“Flows today were skewed aggressively towards better sellers of all emerging markets paper,” a New York-based trader said.

Asian credits led the sell-off, with investment-grade cash bonds closing their session 5 basis points to 15 bps wider, a London-based trader said.

Technology names from China were 10 bps to 20 bps wider while Korea’s bonds moved out between 5 bps and 8 bps, he said.

Spreads from India were between 5 bps and 10 bps wider amid “very thin” liquidity, he said.

“Malaysia was mixed, with the Malaysia curve 5 bps wider,” he said.

Petroliam Nasional Bhd. (Petronas) saw its curve widen by 10 bps, he said.

From Latin America, bonds moved wider and lower “as the pain from last week carries over into this morning,” a New York-based trader said. “Liquidity is the primary concern, as cash prices are difficult to navigate, with few prints at all in the early going.”

Most of the inquiries were for bids, another New York trader said, but volumes remained relatively small.

“Hopefully it does not turn into a liquidation sell-off,” he said. “But I have seldom seen a sell-off of this kind, with such relatively small selling volumes and so little screen trading.”

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