EM sovereign bonds drop with broader markets; Argentina volatile; LatAm primary still quiet

By Rebecca Melvin

New York, July 6 – Emerging markets were rattled on Thursday as global government bond markets sold off again, led by the eurozone and Germany, where the yield on that country’s 10-year benchmark went to highs not seen in more than a year.

In the Middle East, where rates volatility added to geopolitical concerns, many sovereign credits were down sharply. Saudi Arabia’s debt curve was pressured lower by about a point during the session, according to data from a London-based trading desk.

In Latin America, Argentina’s sovereign bonds were volatile, trading down sharply amid a combination of weakness in the Argentine peso and higher U.S. Treasury yields, traders said.

Argentina’s 7 1/8% century bonds, which priced on June 19 at 90, or a 10% discount to par, fell to as low as 88¼ during the session before moving back up to 89¼ by early afternoon, compared to a close of 90¾ on Wednesday.

“Argentina was really beaten up this morning,” a trader said.

Volatility seemed to take a toll on Latin America’s primary market. There were no new deals heard in Latin America, and a deal from Argentina’s Pampa Energia SA remained unpriced despite expectations that it would price this week.

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