Morning Commentary: EM credit spreads tighter after ECB meeting; Ecobank Transnational on calendar

By Rebecca Melvin

New York, June 14 – Emerging markets credit in some markets such as the Middle East and Africa were a little tighter on Thursday, likely on the back of some investor buying into the weekend. But the market overall remained thin and illiquid, a London-based trader said.

“I think people have kind of checked out with the football on,” the trader said, referring to the soccer World Cup getting underway in Russia.

Market reaction to the European Central Bank’s policy update could have possibly given a little boost to government bonds, but “nothing major,” the trader said.

With the Federal Reserve meeting cleared away without much market angst it looks like some buyers stepped in, but it is difficult to determine why some credits were doing better or worse than others.

“It seems to be just the way people are positioning things, and angling it,” the trader said.

Egypt sovereign bonds were mixed but slightly better on the long-end of the curve. Iraq and Jordan continue to do OK.

Africa came into focus as pan-African banking group Ecobank Transnational Inc. announced an offering of U.S. dollar-denominated notes that will begin roadshow meetings on Monday.

“They may get some traction; we’ll have to see,” the trader said of the new deal going up on the calendar.

The European Central Bank said Thursday that it would end its bond-buying program in December and promised rates in the euro zone wouldn’t start to rise until at least mid-year 2019.

The U.S. Federal Reserve raised its short-term interest rate another 25 basis points on Wednesday and signaled that four rate hikes may be in the cards for this year, not two or three as some previously had hoped.

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