Oil prices, Bank of Europe rate cuts boost EM; Lat-Am spreads tighten; Ghana postpones deal

By Christine Van Dusen

Atlanta, Aug. 4 – Emerging markets bonds moved higher and tighter on Thursday as oil prices rebounded and the Bank of Europe unexpectedly cut its rates and resumed bond purchases in an effort to reduce the impact from Brexit.

“Emerging markets credit continues to trade well, with spreads tightening and cash prices gapping higher,” a trader said.

Said an analyst, “Oil has become somewhat of a narrative, as [Gulf region] bonds felt the pinch yesterday.”

Overnight, the markets “saw some stabilization in oil prices,” he said.

Brazil led the way higher on Thursday, with cash prices up as much as 1½ points from late-Wednesday’s levels, another trader said.

“The EM Index looks to be up at 93.15 from 93 close and even Venezuela is recouping some of the big losses from yesterday,” he said, while noting that buyers remained cautious around the sovereign.

Brazil’s five-year credit default swaps spreads were tighter at 277 basis points from 284 bps while Mexico’s moved to 146 bps from 153 bps, another trader said.

In other news, Ghana has decided to delay the issuance of up to $1 billion of notes due to market conditions, a market source said.

“A postponement of the deal would be considered a credit-negative, adding concerns about the ability of sub-Saharan sovereigns – except for South Africa and supras – to tap international debt markets,” an analyst said.

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