Some EM takes 'breather' as G20 begins; Lat-Am mixed; oil prices rise; Syria ceasefire is set

By Christine Van Dusen

Atlanta, Feb. 26 – Some emerging markets assets saw spreads widen into the close on Friday, taking a "bit of a breather" from recent strength, while others benefited from improved but fragile risk sentiment as the meeting of G20 finance ministers commenced.

"EM credit continues to perform well, despite a bit of a breather today," a trader said. "Hopes are that we can consolidate in this range and continue to grind higher."

Brazil's five-year credit default swaps spreads closed at 458 basis points, up from 452 bps, while Mexico's widened to 199 bps from 196 bps.

"Cash prices didn't budge much, with levels remaining in late-yesterday's context," he said.

High-yield names from Latin America were mixed, with Venezuela's 2027s finishing at 41.25 from 39.75, Petroleos de Venezuela SA's 2017s ending at 49.75 from 48.25 and Argentina's Bonar 2024s closing at 108.10 from 108.

"Flows saw better buying of low-beta Lat-Am sovereigns throughout the day," he said. "Important to watch out for lots of central bank activity in the coming weeks, starting with the G20."

The meeting is expected to "throw a spotlight on the broader economic picture and the role of its host, China," a London-based strategist said.

This came as the People's Bank of China tried to reassure the markets that there still exists ways to address downside risk. This, plus higher oil prices on the back of talks between Russia and Iran, helped improve sentiment.

In other news, the ceasefire in Syria was expected to begin.

"Some skepticism still prevails, as the deal is nonbinding and parties can use 'proportionate response' to defend themselves when attacked," the strategist said. "Moreover, it is not entirely clear which groups are deemed to be terrorism organizations."

Peru sees profit taking

In trading, bonds from Peru came off their best levels of the day on Friday, a trader said.

Profit-taking set in, he said, and the market was attempting to consolidate.

"Cash prices have made a big move higher, so it's only natural that market takes a bit of a breather," he said.

Oman reduces expectations

Oman received some attention on Friday, as the sovereign reduced its oil price expectation for this year to $33 per barrel from $53 per barrel.

As a result of declining oil prices, Moody's Investors Service cut Oman’s A1 rating to A3 on Friday.

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