Risk-off mood persists; liquidity still scarce; Thailand, Indonesia widen; Ukraine tone better

By Christine Van Dusen

Atlanta, Dec. 15 – Emerging markets assets started Monday’s session on a weak note, as liquidity continued to thin and investors remained in risk-off mode, even as oil prices managed a small bounce.

“Market sentiment began the week on a jittery note, amid news of a hostage siege at a Sydney cafe,” according to a report from Barclays Research. “Oil rallied from multi-year lows following reports that Libya closed two of its oil ports.”

Russian credit default swaps were 5 basis points wider than Friday and Turkey’s were 4 bps wider, a source said.

And high-grade bonds from Asia moved out between 3 bps and 5 bps during the session, a London-based trader said.

“As we move ever closer to Christmas, client flows are limited here,” a London-based analyst said.

Oil prices rallied somewhat on Monday morning despite comments from the energy minister of the United Arab Emirates, who said OPEC would not cut production even if prices fall to $40.

“Still some buyers of Russia around, but they have been very selective and remain a small minority,” the analyst said.

The tone for assets from Ukraine improved on Monday, as the new truce with Russian separatist forces was “holding better,” according to a report from Commerzbank.

“Some positive vibes out of Eastern Ukraine,” the report said.

In Turkey, some government protestors were arrested as the president stepped up his campaign, a source said.

“Clearly that will be a concern for investors, but it is also not new for the country,” he said. “We still think that low United States rates and oil prices will be positive for Turkish credit, so we remain positive.”

Asia firms

From Asia, the market firmed up slightly into the open but saw sellers, the London trader said.

“Liquidity remained challenging, as we head closer to year-end, with clients sidelined making minor adjustments to their books,” he said.

Bonds from Thailand were about 5 bps wider while property corporates from China moved 1/8 point to 3/8 point lower.

“Oil names are 1 point to 1½ points lower,” he said.

Indonesia’s curve was ½ point to 1 point lower and 5 bps to 10 bps wider on a spread basis, he said.

“Indonesia’s 2044s touched lows of 122¼, closing at 122½ bid, 123 offered,” he said. “Indonesia’s 2024s traded down at 112½.”

China’s Kaisa Group Holdings Ltd. saw its 8 7/8% notes due in 2018 trade at 98 7/8 bid, another trader said.

© 2015 Prospect News.
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