EM debt weaker in light trade; Argentina struggles to stabilize; Oman, Aldar eye deals

By Rebecca Melvin

New York, Aug. 31 – Emerging markets were quiet on Friday ahead of the long holiday weekend in the United States for Labor Day, with Argentina showing some signs of stability after a dramatic sell-off of the country’s bonds and currency beginning Wednesday when president Mauricio Macri announced he is asking the International Monetary Fund to speed up the release of its $50 billion funding package for the country.

The pace of selling has slowed, but the peso and bonds continued to drift lower in a thinly traded market early Friday. By the end of the session, the Argentine peso had recouped some of the losses in its recent plunge. The Argentine peso was last 36.90 to the U.S. dollar, which was improved compared to an early level of 39.35 and compared to a close of 38.53 on Thursday, when the currency fell almost 12%. The cost of credit default swaps was up to 759 basis points, a surge of 102 bps on Thursday. A second source put the CDS level at 750 bps.

Argentina’s 7 1/8% century bonds due 2117 traded down again on Friday by more than a point to 67½ bid, 68.20 offered. That was down from 74.10 a week ago and from 80 a month ago.

Investors were somewhat soothed by the Argentina government’s promise to work through the weekend and to hold a press conference on Monday to outline how it plans to help the peso recover.

The downdraft came despite Argentina’s central bank’s drastic action on Thursday to raise interest rates 15% to 60%, making it the highest rate among emerging market countries. The bank last raised rates in July to 45% from 40%.

Meanwhile, the Turkish lira, which has been the hardest hit emerging market currency this year, fell as much as 5% against the dollar on Thursday.

Despite the fact that the emerging markets debt market was weighed down on Friday by worries about Argentina, the new issue market has rekindled in the Middle East and Africa region with new mandates for several Gulf Cooperation Council entities.

The prospective issuers include Oman, which has reportedly mandated banks for a new issue of U.S. dollar-denominated bonds, and the United Arab Emirates’ Aldar Properties PJSC, which has selected banks for a planned sukuk, or Islamic bond, to be issued subject to market conditions, according to a market source on Friday.

According to reports, Oman has selected Citigroup, Standard Chartered Bank, Credit Agricole, First Abu Dhabi Bank, Emirates NBD and ABC BSC to syndicate its deal.

Earlier this week Abu Dhabi Islamic Bank and Al Hilal Bank were said to be shopping deals for pricing within the next several weeks.

For the Latin America region, there was unlikely to be much of a primary market for the beginning of September, which is typically a busy month for new issuance.

The market overall on Friday was weak against U.S. Treasuries that were unchanged and stocks that were narrowly mixed. Investors were disappointed that trade deal talks between the United States and Canada broke down on Friday without any headway on a few key issues. Talks were scheduled to resume Wednesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.