EM bonds stabilize on better oil prices; FOMC meetings begin; Brazil misses out on uptrade

By Christine Van Dusen

Atlanta, Dec. 15 – Most emerging markets bonds improved on Tuesday, taking a break from their steady widening and lowering, as oil prices stabilized at the start of the Federal Open Market Committee meetings.

“The tone seems to be a touch better as we take a breather,” a London-based trader said. “Most accounts have been on the sidelines, awaiting the Fed, before deploying the cash.”

The Fed, which began its two-day meeting on Tuesday, was expected to announce on Wednesday a rate hike of 25 basis points.

Cash bonds from Turkey were better on Tuesday after a great deal of selling, he said.

“Cash also looks cheap to credit default swaps here, as the Street is probably long of cash,” he said. “One-year to three-year bonds are for sales as everyone tries to avoid front-end exposure to rates.”

Overall, economic data for Turkey “seems resilient,” even without having “a working government for a large part of the year,” he said. “Going forward we should see business activity pick up, now that there is a government in place.”

In other trading on Tuesday, bonds from Peru improved, with spreads moving in.

But Brazil missed out after federal police searched the home of the Lower House speaker, a trader said.

“The market is still nervous that we are in for more pain in Brazil,” he said. “But so far we haven’t seen any exacerbated selling.”

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