Emerging markets move in line with Treasuries; late drop hits Venezuela; Bahrain, Oman weaker

By Rebecca Melvin

New York, July 31 – Emerging markets moved pretty much in line with U.S. Treasuries in the early going on Monday, the last trading day of the month, according to market sources.

Venezuela and Petroleos de Venezuela SA traded weakly, but mildly during most of the session until the last hour when the bonds dropped sharply after U.S. Treasury Secretary Steven Mnuchin announced sanctions against Venezuelan President Nicolas Maduro.

Both Venezuela sovereign and PDVSA bonds fell 1.5 points to 2 points, a New York-based trader said.

Prior to the news, investors were in a wait-and-see mode, a second New York-based trader said.

The PDVSA 8˝% notes due 2017 slid down to 74 bid, 75 offered, from about 75 bid, 76 offered before the news. The PDVSA 6% notes due 2026 moved down closer to 30, from 32 bid, 33 offered earlier in the day.

The Venezuela bonds due 2019 were seen at 43 bid, 44 offered before the sanctions on Monday, and the Venezuela bonds due 2031 were at 42 bid, 43 offered.

Elsewhere, emerging markets were quiet as the calendar was about to flip to August, sources said. But Bahrain was weaker on the heels of a downgrade by Moody’ Investors Service by two notches to B1 from Ba2. Moody’s also downgraded Oman’s long-term issuer and senior unsecured bond ratings to Baa2 from Baa1. The downgrades left both sovereign ratings with a negative outlook.

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