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Morning Commentary: EM spreads tighter amid weaker Treasuries; Gulf states supply eyed
By Rebecca Melvin
New York, Sept. 7 – Emerging markets debt spreads were tighter on Friday, benefiting from a move lower in U.S. Treasuries after the U.S. payrolls report, and rebounding from being possibly oversold. But new issuance, other than from Asia, remained at bay, according to market sources.
For the week, spreads on Turkey’s sovereign bonds are 30 basis points to 40 bps better, and South Africa struggled a bit to come back, but were 3 bps to 6 bps better on Friday, a London-based trader said.
“We’ve seen a decent bounce,” the trader said, attributing the move partially to the move lower in U.S. Treasuries, which pushed the yield on the benchmark 10-year Treasury to 2.94%.
The iShares J.P. Morgan US Dollar Emerging Markets Bond ETF was 105.88 early Friday, which was up 0.47, or 0.45%, on the day, but the ETF is still down 10% compared a year ago when it stood at 117.26 on Sept. 8, 2017.
New supply, which wasn’t forthcoming this week, is anticipated next week from the Middle East Gulf Cooperation Council. There are four corporate deals on the calendar from the GCC, including those from Al Hilal Bank, Abu Dhabi Islamic Bank, Aldar Properties PJSC and Arab Petroleum Investments Corp., or Apicorp.
Al Hilal and ADIB held fixed-income investor meetings this past week in London and the Middle East for sukuks, or Islamic bonds. Aldar, the Abu Dhabi-based real estate company, announced the previous week that it intends to issue a sukuk. And Apicor has mandated banks to arrange a series of fixed-income investor meetings.
But Oman has not mandated banks for a new issue. Instead, a deal for the National Bank of Oman SAOG is on the table, a London-based trader said.
“There was some confusion, or lines crossed in the press. But Oman came out and said it is not planning to issue new paper until 2019,” the trader said.
© 2015 Prospect News.
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