EM mostly firm, but quiet; Jamaica prices tap of 2028, 2045 notes; CIFI Holdings prices

By Rebecca Melvin

New York, Aug. 16 – The emerging markets were mostly firm and quiet on Wednesday, but there was some new issue activity, and bonds were generally a little tighter in the secondary market, with slow trading activity as the summer period dragged on.

In new issues, Jamaica priced $505 million reoffered 6¾% notes due 2028 at 113.288 to yield 5%, and the sovereign also priced $364 million reoffered 7 7/8% notes due 2045 at 118.339% to yield 6.45%. The tranches are listed on Luxembourg’s Euro MTF Market.

Also in the primary market, China’s CIFI Holdings (Group) Co. Ltd. priced $300 million of senior perpetual capital securities at par with a 5 3.8% initial distribution rate and a 3.571% spread.

In secondary dealings, markets were said to be solid but quiet.

It’s “very dull,” a London-based trader said in the early going.

In Mexico, the sovereign credit was steady and the Mexican peso “was not even paying attention” to the start of renegotiation talks on the North American Free Trade Agreement in Washington, D.C, said a New York-based economist focused on Latin America.

Market participants are ably separating the noise from what matters, and unless there is a specific policy being telegraphed it is not going to move, the economist said.

“Right now, we are at the 30,000-foot view, when we see implementation rules and drafting, that’s when the peso is going to respond,” a New York-based economist said.

Also interest rates are expected to remain steady in Mexico, so conditions for the credit markets are favorable.

Meanwhile, the release of the minutes from the U.S. Federal Reserve’s last policy-setting meeting did not reveal any new or unexpected market information, sources said.

The U.S. Treasury 10-year benchmark strengthened somewhat after the release, however, sending the yield down to 2.225%, which was a decrease of less than one-tenth of a percent.

The FOMC policy makers stressed at the July 25-26 meeting that they will continue to remain data-dependent in deciding when to adjust the Fed Funds target rate from its current 1% to 1¼% range.

According to the minutes, the members still expect economic activity will expand at a moderate pace and the labor market to strengthen somewhat further. But inflation remains below the committee’s 2% objective and will have to be monitored closely to determine if the low rate is transitory.

Members continued to be committed to beginning the process of shrinking its portfolio of Treasury and mortgage-backed security assets, probably starting as soon as September.

They saw “roughly balanced” near-term risks to the economic outlook, but, in light of concern over a recent slowing in inflation, they agreed to continue to monitor inflation developments closely. They saw future Fed Fund rates adjustments likely to be warranted but with timing and size dependent on economic conditions.

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