Greece roils markets, but appetite for EM improves; volumes dwindle; issuers set roadshows

By Christine Van Dusen

Atlanta, July 1 – Greece remained top-of-mind for the markets on Wednesday as the country’s debt was downgraded again – this time from Caa2 to Caa3 by Moody’s Investors Service – and the prime minister pushed his constituents to vote against an international bailout deal.

Even though this created a great deal of volatility, emerging markets assets weathered the storm fairly well. Risk appetite improved, though volumes stayed low.

“This round of weakening so far has been well-maintained, though the market has been reluctant to add or panic-sell before Greece reaches resolution,” a trader said.

Bonds from Latin America-focused Pacific Rubiales Energy Corp. were very active on Wednesday morning, with prices bouncing around for the 2021s ahead of a vote on the takeover bid from Mexico’s Alfa SAB de CV and Harbour Energy Ltd.

Other Latin American debt put in a good morning on Wednesday amid a better appetite for risk, a New York-based trader said.

“We now are back to watching stronger U.S. data and higher U.S. yields,” he said. “There has been good activity on the open today, as accounts look to be putting money to work as the new month and quarter begin.”

By the end of the day, low-beta spreads had tightened slightly and five-year credit default swaps spreads for Brazil were seen at 260 basis points, from the previous day’s 261 bps.

Mexico’s credit default swaps spreads moved from 131.5 bps to 130 bps, a trader said.

Cash prices held up “relatively well” in the face of a Treasury sell-off, he said, but closed far from their best levels of the day.

High-yield credit from Latin America finished the session higher as risk appetite remained healthy, he said.

‘Vibrant’ morning for Asia

Trading of Asian bonds was “fairly vibrant” on Wednesday morning, even with Hong Kong out on holiday, a London-based trader said.

Bonds from Indonesia and Philippines were soft at the open but rallied, with Indonesia’s 2025s moving up 50 cents.

“Investment-grade corporate sentiments were also better today, as tech and oil are making a comeback,” he said.

Asian bonds turn choppy

Later in the session, Asian bonds remained choppy as economic data from China for June missed expectations, a London-based trader said.

“The Hong Kong market was closed, but decent flow went through, and we’re seeing some support on the bonds here,” he said. “The only sovereign better-offered on the day was Mongolia and its 2018 and 2022 curves.”

High-yield property names saw some bids, he said.

Ukraine bonds move lower

Looking to Ukraine, sovereign bonds have trended lower so far this week, said Fyodor Bagnenko, a fixed-income trader from Dragon Capital.

Quasi-sovereign banks have also moved lower, he said, while corporates have been “generally inactive.”

America Movil on roadshow

Mexico’s America Movil SAB de CV set out on a roadshow on Wednesday to market a possible issue of peso- or dollar-denominated notes, a market source said.

Citigroup, Inbursa, Banco BBVA and Santander are the bookrunners for the Rule 144A and Regulation S deal.

The meetings began on June 29 in Mexico City. The roadshow will travel to London, Boston and New York before concluding on July 10.

America Movil is a Mexico City-based telecommunications company.

Renaissance Services roadshow

Oman’s Renaissance Services SAOG is on a roadshow for an issue of dollar- or rial-denominated notes, a market source said.

Bank Sohar, National Bank of Oman and Standard Chartered Bank are the bookrunners for the potential deal.

The issuer provides services to the oil and gas industry.

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