Morning Commentary: EM debt firm as market weighs potential for China-U.S. trade deal

By Rebecca Melvin

New York, Dec. 3 – Emerging market debt was firm on Monday as investors were cheered by an informal agreement by the presidents of China and the United States for a temporary cease fire on tariffs while further negotiations are conducted.

In weekend meetings between China president Xi Jinping and U.S. president Donald Trump, Trump agreed to postpone for 90 days implementation of further U.S. tariffs that had been scheduled to take effect on Jan. 1 while trade talks continued. On Monday, U.S. Treasury secretary Steven Mnuchin said there is an immediate focus on reducing auto tariffs.

Equities were higher on the news and U.S. Treasuries slipped, sending the yield on the benchmark 10-year note to 2.999%. Oil prices were also higher and the U.S. dollar was slightly lower against a basket of international currencies.

In the new issue market, the Republic of Indonesia announced it is selling U.S. dollar-denominated notes (Baa2/BBB-/BBB) in three tranches that are being registered with the Securities and Exchange Commission.

In addition, the China Development Bank said it plans to issue three-year and five-year dollar-denominated floating-rate senior notes and four-year euro-denominated fixed-rate notes, according to a syndicate source.

The tranches (expected rating: A1/BBB) will be sold under Regulation S as part of the bank’s debt issuance program and are subject to market conditions.

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