Quiet, wider session after economic data and ahead of U.S. holiday; issuers line up deals

By Christine Van Dusen

Atlanta, Sept. 4 – Risk appetite declined and trading of Asian bonds was slow during a shorter Friday – ahead of Labor Day weekend in the United States – as China remained on holiday and investors digested the latest non-farm payrolls data from the United States.

“Weak nonfarm payroll data, mixed with positive unemployment rate and average earnings, sent Treasuries swinging violently early this morning,” a London-based trader said. “The tone, however, was generally positive towards the labor market and has investors second-guessing whether a September rate hike is still a possibility.”

After the release, Latin American credits felt weaker, a New York-based trader said.

“Cash prices were well-offered, although no prints on this illiquid holiday-shortened Friday,” he said. “Weakness in [currency] seems to be driving this weakness in EM paper, as a Fed rate hike seems more imminent after a mostly positive report.”

Cash prices dipped and low-beta spreads widened in the afternoon, giving up any tightening experienced on Thursday, another trader said. Brazil led the way wider, with five-year credit default swaps spreads closing at 380 basis points from 372 bps.

In deal-related news, several issuers – including China’s Shenzhen Expressway Co. Ltd. and Bulgaria Energy Holding EAD – advanced deals.

Market sources were also whispering on Friday that Latvia could issue euro-denominated notes by the end of the year.

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