Greece on market’s mind; Asian bonds mixed; Ukraine makes progress; Pacific Rubiales in news

By Christine Van Dusen

Atlanta, July 2 – Investors were in wait-and-see mode on Thursday amid little progress on Greece’s economic crisis – ahead of the referendum expected on July 5 – and softer economic data from the United States.

The country added 223,000 new jobs in June and the unemployment rate moved to 5.3% while weekly jobless claims moved up by about 10,000.

“A lackluster employment report has markets pushing back expectations for Fed rate hikes,” a New York-based trader said.

Spreads tightened on the day, with Brazil an outperformer, he said.

Five-year credit default swaps spreads for Brazil ended Thursday at 254 basis points, from 260 bps, while Mexico’s moved to 128.50 bps from 130 bps.

Cash prices performed well and followed Treasuries higher, he said, though volumes were subdued ahead of the July 4 holiday in the United States.

High-yield credits from Latin American finished the day unchanged or slightly higher, he said.

Most corporate bonds from Asia were firm, following some positive overnight momentum, with investment-grade names moving between 2 bps and 5 bps tighter, a London-based trader said.

“Sovereigns are a mixed bag,” he said. “Philippines’ 2040s are unchanged, with off-the run, mid-curve bonds up 1/8 point to ¼ point.”

He also noted that investors were buying sukuk, which outperformed during the session.

Meanwhile, Ukraine was taking steps toward solving its own economic crisis.

“The especially positive tone of a joint communique between Kiev and its creditors could mean they have reached some understanding over the main point of the negotiations – a principal haircut,” according to a report from Schildershoven Finance BV. “The statement could have a strong positive affect on Ukrainian sovereign bonds.”

Ukraine bonds rise

Indeed, Ukraine’s sovereign bonds have risen ½ point on the news, said Fyodor Bagnenko, a fixed-income trader from Dragon Capital.

“Ukraine’s meeting with bondholders in Washington seems to have brought modest progress,” he said. “The Ukrainian Finance Ministry stated the sides agreed on confidentiality arrangements that allowed for proceeding to ‘principal-to-principal’ talks next week.”

Pacific Rubiales votes are in

Looking to Latin America, Pacific Rubiales Energy Corp. was in focus again, this time on the news that the votes – for or against a takeover from Mexico’s Alfa SAB de CV and Harbour Energy Ltd. – were in.

This spurred Pacific Rubiales’ bonds to trade lower, a New York-based trader said.

“We’ll see if any vote info trickles in as we make it back to our desks on Monday morning,” he said. “But we clearly traded this week as if bondholders think this is a no-go.”

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