EM starts firm, then widens on oil prices; trading slows ahead of Fed chair’s Friday speech

By Christine Van Dusen

Atlanta, Aug. 25 – Risk assets moved lower on a light-trading Wednesday as oil weakness hurt sentiment and emerging markets investors awaited Federal Reserve Chair Janet Yellen’s speech for Friday.

South Africa remained an underperformer, with its dollar and sovereign bonds opening Wednesday morning about 15 basis points to 20 bps wider.

South Africa’s Eskom Holdings saw spreads widen too, this time by as much as 40 bps, a trader said.

In deal-related news, market-watchers were whispering about a possible issue of dollar-denominated notes from Colombia.

Ghana is expected to revive plans for an issue of up to $1 billion of notes, which was delayed earlier this month.

Latin American bonds started out firm on Wednesday, with slightly better buying, a New York-based trader said.

At the end of the day, Latin American spreads moved wider, with Brazil’s five-year credit default swaps spreads closing at 261 bps from 256 bps and Mexico’s at 139 bps from 136 bps, another New York trader said.

Risk assets moved lower on oil weakness, another New York trader said.

Looking to Turkey, the central bank on Tuesday cut its overnight lending rate by another 25 bps to 8½%, its sixth consecutive cut, an analyst said.

In response, Turkey cash bonds widened as much as 3 bps, a trader said, and banks and corporates were mostly unchanged.

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