Bulgarian Energy sells notes; EM rallies on Fed statement, then reverses; Ukraine still weak

By Christine Van Dusen

Atlanta, July 27 – Bulgarian Energy Holding EAD sold notes on a Wednesday that saw emerging markets assets rally after the release of the Federal Reserve’s latest statement, then reverse into the close.

The FOMC left rates unchanged, saying that near-term risks had diminished.

“The Fed statement underwhelms,” a New York-based trader said.

Mexico’s five-year credit default swaps spreads closed on Wednesday at 151 basis points from 149 bps. Brazil bucked the trend, with CDS moving to 293 bps from 296 bps.

“Cash prices continue to feel very heavy and underperform both CDS and moves in Treasuries by a wide margin,” he said. “Lat-Am high yield finishes mixed on the day, with Venezuela firmer, whereas Argentina is soft.”

“Flows continue to see better buying,” he said. “With the Fed behind us, markets now look to the Bank of Japan and whether they can deliver this Friday.”

This kicks off a spree of central bank activity, a London-based analyst said.

“EM credit has benefitted from the ultralow rate environment,” he said. “The outlook remains clouded ahead of U.S. elections, the Italian referendum on constitutional changes and United Kingdom-European Union divorce settlements.”

Looking to Ukraine, weakness continued for the sovereign’s bonds amid concern about the next IMF disbursement, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

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