Jobs numbers, oil prices, Asian holiday keep EM quiet; Lat-Am spreads widen; Pakistan active

By Christine Van Dusen

Atlanta, Feb. 5 – Trading of emerging markets assets was somewhat muted on Friday, due to the Asian holiday weekend, with much of the energy sucked away by disappointing non-farm payrolls numbers from the United States.

The jobs numbers – which showed that the U.S. economy added 151,000 jobs in January – fell short of estimates. But “it feels like most people are hedged and positioned into it, and I guess we await our next cue for direction,” a trader said.

Oil prices were another factor on Friday, losing gains made earlier in the week.

“It felt like the market was trying to firm up and find a footing,” a trader said. “We open tighter, only to fade into the close.”

But “EM is still outperforming wider risk markets, as dollar longs continue to be unwound,” he said. “Given the pockets of positivity seen this week, we should start to see the supply tap finally turned on.”

From Latin America, trading was mostly quiet on Friday, with paper holding its bid for most of the day, a New York-based trader said.

Then, they “simply seemed to stop trading, once risk assets began to aggressively sell off later in the day,” he said.

Five-year credit default swaps spreads for Brazil finished Friday at 471 basis points from 427 bps, while Mexico’s ended the session at 202 bps from 199 bps.

“Cash prices stay firm and, in some cases, finish higher than yesterday,” he said. “Latin American high-grade finishes mixed on the day, with Venezuela higher whereas Argentina is mostly unchanged.”

Indeed, Venezuela’s 2027s closed at 38.50 from 37.75, and Argentina’s Bonar 2024s finished at 107.60 from 107.75.

PDVSA closes higher

PDVSA’s 2017s, meanwhile, closed at 42 from 41.50, the New York trader said.

“Volumes were on the lighter side today, from the inquiries we saw, with some better buying of low-beta in small size,” he said. “With China out next week, volumes may be a bit subdued or maybe not available.”

Pakistan in focus

Bonds from Pakistan were busier, with buyers seen for the 2019s and real-money investors picking up some of the 2024s and 2025s, another trader said.

“The curve is super-steep, with locals buying 2019s and leaving the Street short of bonds there,” he said. “We have 2016s maturing next month, so I expect locals will be looking to reinvest into the curve.”

Ukraine mostly unchanged

Into the end of the week, sovereign bonds from Ukraine were mostly unchanged, with some better bids getting hit, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Quasi-sovereign banks actually managed to finish slightly stronger,” he said. “All eyes are still on the political space, as two technocratic ministers took back their resignations.”

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.