Mexico issues two tranches; backdrop favorable for EM; LatAm names tighten; Bahrain could issue

By Christine Van Dusen

Atlanta, Aug. 8 – Mexico sold new notes on a Monday that saw emerging markets assets trade well on the day but close off their best levels as the previous week’s central bank decisions created a favorable backdrop.

“While the United States 10-year Treasury yield climbed by 10 basis points into this morning following the strong job gains, it will unlikely shift investors’ expectation of a rate hike amid easing policies in other key developed markets and ahead of the U.S. elections,” a London-based analyst said.

Latin American bonds experienced “varying degrees of strength” on Monday, with selling slowing during the morning session, a New York-based trader said.

“Some credits have yet to find much giddy-up, as dealer longs are still putting pressure on them,” he said.

Colombia’s Ecopetrol SA was an outlier, he said, running up by as much as 2 points on muted volumes.

“Peru also seems to be struggling to find its way higher, with only a slight move higher today in the banks and various corporates,” he said. “Mexican high-grade has managed to strengthen, and [Cemex SAB de CV] is also grinding higher with very little selling. Most days we see some amount of Cemex selling from an institutional account base.”

Brazil’s five-year credit default swaps spreads closed Monday at 271 basis points, out from 268 bps after trading as tight as 267 bps, another trader said. Mexico’s outperformed, moving to 139 bps from 142 bps and narrowing earlier in the session to 137 bps.

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