Rough day for EM bonds; most names widen on Treasury moves; Yunnan Energy prints notes

By Christine Van Dusen

Atlanta, Oct. 15 – China’s Yunnan Energy Investment (Overseas) Co. Ltd. sold notes on a brutal Wednesday, with spread-based credits taking a beating after economic data from the United States sent Treasuries plummeting.

September retail sales in the United States fell more than expected, and Treasuries printed as low as 1.86% on Wednesday, causing bonds to make “massive moves not sighted since the expansion of quantitative easing by the Fed to include U.S. Treasuries in 2009,” a London-based trader said.

This – plus a poor global tone and worries about Ebola – sent most emerging markets assets wider during the session.

Though some lower-beta names and long-dated assets from the Middle East attempted to keep up with the rates moves, “it was a hopeless task,” the trader said.

Looking to Latin America, banks managed to outperform other assets on Wednesday, a New York-based trader said, but overall there was quite a bit of widening.

Buyers were spotted late in the day, with names like Latvia, Lithuania and Poland moving higher with rates, the London trader said.

Serbia, meanwhile, saw its bonds remain unchanged on Wednesday.

Credit default swaps spreads started out mixed, then widened out significantly, with Russia’s moving out 1 bp at the open before closing wider by 13 bps.

Turkey’s five-year CDS started the day narrower by 4 bps but finished wider by 3 bps, he said.

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