EM credit expected to continue strong; Argentina underperforms, Ukraine outperforms

By Rebecca Melvin

New York, Jan. 31 – Emerging markets debt recovered on Wednesday from some profit taking early in the week, as market players anticipate ongoing strength after record new issuance and spread tightening in January, according to market sources.

Emerging market debt saw record primary market activity in January. There is typically a surge in volume in January, but levels were even higher than expected, with about $75.8 billion of total emerging market debt, according to Prospect News’ data, including roughly $30 billion of sovereign debt coming to the market in January.

Argentina, bringing $9 billion of notes, and Oman, which brought $6.5 billion, were two notable issuers in terms of deal size. On Wednesday, Poland squeezed in a €1 billion deal of 8½-year green bonds.

Of the sovereign issuers, Argentina was an underperformer, likely due to the high volume of new paper as well as due to questions arising from the country’s central bank action to cut rates at the same time that inflation is a concern.

A notable outperformer for the month was Ukraine. The sovereign has enjoyed strong growth compared to the last couple of years, and there have been no geopolitical conflicts. Meanwhile, Ukraine debt was very cheap to start with, a market source said.

© 2015 Prospect News.
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