EM debt gets slow start; Oman under pressure along with some African sovereigns

By Rebecca Melvin

New York, Jan. 2 – Emerging markets debt got off to a “slowish start” on the first trading day of the year on Wednesday. Financial markets were closed on Tuesday for New Year’s Day.

EM bonds struggled as a rally in U.S. Treasuries sent the yield on the benchmark 10-year note to 2.67%, a London-based market source pointed out. Meanwhile U.S. stocks and oil prices reversed early losses to end the day higher.

Light trading and a quiet primary market were expected to persist for the current holiday-shortened week.

In Wednesday’s market, Oman was under pressure along with some African sovereigns to start the year, the source said.

According to the state budget plan published on the Oman News Agency Tuesday, the Omani government expects to raise this year 2.4 billion riyals, which is the equivalent to about $6.2 billion, to cover a budget shortfall.

Raising funds in the international bond market promises to be expensive especially after Fitch Ratings lowered its rating on the sovereign by a notch to below investment grade last month. The ratings agency said that fiscal deficits are leading to a sharp deterioration in Oman’s sovereign and external balance sheets.

Meanwhile, S&P Global Ratings has Oman’s sovereign ratings at BB/B with a stable outlook and Moody’s Investors Service has its rating at the lowest investment grade with a negative view.

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