Market quiets ahead of holiday week; Peru’s Kuczynski survives impeachment vote

By Rebecca Melvin

New York, Dec. 22 – Emerging market credit was moribund on Friday and likely to remain light next week during the traditional business lull between the Christmas and New Year’s holidays.

“Nothing today,” a London-based trader said when asked about flows in the emerging Middle East and North Africa region as market players wrap up an exceptional year in terms of new issuance and total return.

Total return of the J.P. Morgan emerging market bond indexes ran at about 10% to 11% for the year, market sources said.

News out of Latin America that business-friendly Peruvian President Pedro Pablo Kuczynski survived an impeachment vote of the opposition-controlled Congress late Thursday was not expected to boost bonds since there is a chance that the leader may step down voluntarily.

Peru is an investment-grade rated sovereign credit, but the bonds are illiquid and do not trade actively.

Emerging markets bond funds recorded modest inflows for the week, with both hard and local currency emerging market funds attracting fresh money, after a mild outflow last week, according EPFR Global. Investment-grade emerging market corporate funds posted their biggest outflow since the final week of the first quarter of 2017 and high-yield emerging market funds since mid-March.

At the country level, redemptions from Korea bond funds hit a 58-week high, and Russia bond funds extended an outflow streak stretching back to mid-August.

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