Montenegro roadshow ahead; payrolls data puts pressure on EM; Asia stays firm, Lat-Am suffers

By Christine Van Dusen

Atlanta, March 6 – Montenegro set a roadshow on Friday as the release of positive payrolls data from the United States pushed Treasury rates higher and put pressure on some emerging markets assets.

“The rise in U.S. rates only seemed to bring more sellers into a challenged liquidity backdrop and a risk-averse market in most assets, globally,” a New York-based trader said. “We saw less activity today as the market seemed a little shocked at where things traded and needed time to regroup and figure out what to do at the start of next week.”

The payroll numbers – which showed that hiring increased in February and that the jobless rate declined – hit Latin American assets fairly hard, he said.

Many investors stayed on the sidelines and watched low-beta cash bonds fall 1 point to 2½ points on Friday. Argentina, however, managed to stand outside the fray, as did Venezuela.

“The market is still comfortable with Venezuela,” he said. “They hope they’ll figure out additional ways to generate revenues and push the thought of default further back.”

Prior to the data release, Asian bonds remained firm, with high-grade cash bonds mostly unchanged during the morning and a little bit of selling seen from real-money accounts ahead of payroll numbers from the United States.

China Huarong Asset Management Co. Ltd. saw its 2025 bonds trade 2 basis points tighter while its shorter-dated bonds narrowed 3 bps to 5 bps, another trader said.

Bonds from Turkey saw significant selling into the end of the week, given the devaluation of the currency, the analyst said.

“It was a difficult week in Turkish credit, with a variety of investors selling bonds,” he said.

Turkish banks widened an average of 27 bps, he said, though some corporates’ euro-denominated bonds performed a bit better.

Asia in focus

Spreads in Korea were mixed, a London-based analyst said, with Export-Import Bank of Korea’s (Kexim) 2025 notes bouncing back up to the tights and Korea Gas Corp.’s 2024s trading 2 bps wider.

“India spreads continued to squeeze with [Icici Bank Ltd.]’s 3½% 2020s up,” he said.

Among high-yield Asian companies, property businesses from China closed the session unchanged while high-yield sovereigns were firm amid little activity.

“The long end for Philippines and Indonesia closed unchanged to ¼ higher,” a trader said. “The belly of the curve was unchanged.”

Russia stays strong

From Russia, bonds continued to put in strong performance, with local and real-money investors creating momentum, the analyst said.

“Credit default swaps are almost 30 bps tighter on the week,” he said.

Even though the United States recently announced it would extend sanctions against Russian companies, investors were encouraged by the improving situation in Ukraine, the stronger ruble and more stable oil prices, he said.

Russian banks were 89 bps tighter on the week, with names like Sberbank leading the way, he said.

Lat-Am moves lower

Taking another look at Latin America, most high-grade credits were lower in price on Friday and spreads for longer-dated bonds were under pressure from the move in Treasuries, a New York-based trader said.

Colombia-based Ecopetrol SA continued to underperform, which hurt investors who “jumped in to buy yesterday,” he said.

And Mexico-based Cemex SAB de CV moved higher on positive headlines about an outlook change from Standard & Poor’s, he said.

European notes tighten

Meanwhile, bonds from Central and emerging Europe tightened 6 bps to 10 bps by Friday as risk sentiment improved after the European Central Bank showed a willingness to buy more bonds, the analyst said.

The new Croatia deal – 3% notes due 2025 that priced at 97.845 to yield mid-swaps plus 255 bps – tightened by 6 bps on Friday, he said.

Middle East mixed

Looking to the Middle East, banks moved in about 3 bps by Friday, with mixed performance from perpetuals, a trader said.

Corporates tightened about 8 bps and euro-denominated assets were standouts, he said.

Abu Dhabi Commercial Bank PJSC’s recent issue of 2 5/8% notes due 2020 that priced at 99.568 to yield mid-swaps plus 97.5 bps underperformed, he said.

Montenegro sets roadshow

Montenegro has mandated four banks to lead a roadshow for a euro-denominated issue of notes, a market source said.

Citigroup, Deutsche Bank, Erste Bank and Societe Generale CIB are leading the marketing trip, which will begin on March 9.

A Rule 144A and Regulation S deal is expected to follow.

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