Morning Commentary: EM attempts to rebound; Pakistan stays active; Ukraine bonds improve

By Christine Van Dusen

Atlanta, Feb. 12 – Emerging market bonds attempted to rebound on Friday morning amid some relief in European equity markets and oil prices, but volumes remained unusually light.

“We’re starting with a promising overnight rebound in oil prices, and with U.S. 10-years back up at 1.68%, despite a weak performance of Asian markets,” a strategist said.

Many EM names opened about 10 basis points tighter on Friday after the market “tanked” on Thursday, a trader said.

“Turkey banks got pushed down by the Street, but very limited paper came out and we are already bidding though yesterday’s offer levels in the screens,” he said. “With Turkey corporates we saw locals and a few others checking for paper on the sell-off. They remain in demand.”

Notes from Pakistan remained “very active,” he said. “Real-money investors remain better sellers, but locals are taking paper out at these levels. And if risk sentiment improves, we could be bottoming out here.”

Bonds from Ukraine rebounded on Friday, with trading moving higher on low volumes and “aggressive Street action,” said Fyodor Bagnenko, a fixed income trader with Dragon Capital. “Quasi-sovereigns moved higher with some decent two-way flow. Corporates remained quiet.”

Looking to Latin America, Chile's Corporacion Nacional del Cobre de Chile (Codelco) tightened 7 bps amid light volumes while Brazil-based Petroleo Brasileiro SA and Vale SA firmed up a little bit, a New York-based trader said.

Brazil-based Braskem SA was better-offered, and high-grade names from Chile continued to trade with “pretty strong credit specificity,” he said. “Overall, the market is very quiet heading into the long weekend.”

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