Morning Commentary: Emerging markets stay heavy heading into weekend; new Iraq bond drops

By Rebecca Melvin

New York, Aug. 11 – Emerging markets remained heavy on Friday, marking a third day of weakness tied to worries over the possibility of the United States and North Korea going to war. But trading volumes were very light heading into a late summer weekend.

“The general tone is still a little heavy,” a London-based trader said.

The Republic of Iraq’s 6¾% notes due 2023, of which $1 billion priced on Aug. 2, slipped below par to trade at 99.5 bid. 100 offered early Friday. They were seen at 99 7/8 bid, 100¼ offered late Thursday, and last Friday, the bonds were 100.35 bid, 100.5 offered, after moving as high as 100.6 on their second day of trading.

In addition to the overall softness tied to geopolitical fears, Fitch Ratings assigned its expected B- rating on the bonds. The rating matches S&P’s B- on the bonds, but Moody’s Investors Service’s provisional Caa1 rating is a notch lower, reflecting the view that the bond carries substantial risks in addition to being highly speculative.

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