Oil prices spike but EM remains weak; Spain turmoil hurts sentiment; Peru spreads move out

By Christine Van Dusen

Atlanta, Jan. 4 – Tensions between Saudi Arabia and Iran led to a spike in oil prices on Monday, but emerging markets assets still did not get a boost during the early session.

“Risk markets remain weak on the highlighted political risk and weak data from China,” a London-based trader said. “But the rally in rates will help cash prices stay unchanged.”

Also hurting sentiment, he said, was the political picture in Spain, where Catalonia was expected to set new elections.

Spreads widened in response to these big-picture problems, with names like Saudi Electricity Co. and Bahrain weakening, another trader said.

“Difficult start to the year,” he said. “Did see demand for most of the perpetuals throughout the session and the usual favorite senior five-year bank paper.”

Long-dated paper from the Gulf region was “around,” he said, “as steep curves will likely remain the norm.”

The market is “expecting some supply soon,” he said. “It remains to be seen who will open proceedings in 2016.”

Monday also saw the bond curve from Turkey stay flat, another trader said.

In other trading, Peru opened on Monday on a weaker note, a New York-based trader said.

“Cash prices are mostly unchanged on spread widening,” he said. “Starting the year on a weak note.”

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