Mexico, Bahrain sell notes; EM bonds firm up, spreads tighten; Syria-related tensions rise

By Christine Van Dusen

Atlanta, Feb. 16 – Mexico and Bahrain sold notes on a firmer Tuesday for emerging markets assets, with spreads tightening after European Central Bank chief Mario Draghi’s dovish comments helped calm investors.

Also helping the tone on Tuesday was the news that, at talks designed to deal with the oversupply of oil, several nations – Qatar, Saudi Arabia, Russia and Venezuela – agreed to freeze output.

Meanwhile, the situation in Syria worsened, with Russia and Turkey accusing each other of ramping up the conflict with military action.

Looking to Latin America, bonds were “trying hard” to firm up on Tuesday morning, but “it takes a lot more conviction and extended stability, globally, for it to reach Latin American credit and be anything resembling impactful,” said a New York-based trader. “But maybe we’re trying to get there, as client selling has certainly cooled but no real buyers are stepping in.”

At the end of the session, Latin American credit moved tighter and higher as “risk assets look past some oil weakness and instead focus on the move in equities,” a New York-based trader said.

Brazil’s five-year credit default swaps spreads closed at 487 basis points from 498 bps, while Mexico’s moved to 217 bps from 224 bps.

Venezuela and Argentina moved higher at the end of the day, with Venezuela’s 2027s closing at 34.25 from 32.50, PDVSA’s 2017s finishing at 41.10 from 38 and Argentina’s Bonar 2024s ending at 107.75 from 107.50.

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