Morning Commentary: EM reacts to Fed minutes; Malaysia, Dubai widen; Ukraine bonds decline

By Christine Van Dusen

Atlanta, Aug. 20 – Asian credits were volatile while other risky assets continued correcting on Thursday morning after the Federal Reserve’s minutes from July showed that officials are closer to increasing the benchmark rate.

The minutes “added to disinflation fears,” according to a report from Barclays. “These concerns escalated last week following China’s decision to weaken [the currency] versus the U.S. dollar. The minutes revealed that members need more evidence that inflation is moving toward goal and the labor market improvement is sufficient and sustainable.”

Buyers emerged for China-based Cnooc Ltd.’s 2025 bonds; then, sellers emerged after the London open.

“Korea was 1 bp to 3 bps wider,” a trader said. “India held in firm for most of the day.”

Bonds from Malaysia widened between 3 bps and 8 bps, he said, while Malaysia’s Petroliam Nasional Bhd. (Petronas) saw sellers.

Looking to Ukraine, sovereign bonds have dipped amid some “anxiety in the market,” said Fyodor Bagnenko, a fixed income trader with Dragon Capital.

“With Wednesday marking exactly five weeks to the Sept. 23 maturity, no news on debt restructuring talks yesterday resulted in some anxiety in the market, pushing the sovereign a point lower,” he said.

Quasi-sovereigns also weakened slightly, he said, “while offers prevailed in the corporates, but with not much actual trading.”

From the Middle East, Dubai's 5¼% 2043 dollar notes were 20 bps wider on the day, trading between 88 and 89, another trader said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.