Spreads widen, liquidity worsens on Turkey protests, economic fears; Dubai Holding outperforms

By Christine Van Dusen

Atlanta, June 6 - Liquidity was poor and depth was thin for emerging markets assets on Thursday as continuing protests in Turkey, which have hurt the sovereign's retail sales and tourist activity, pushed spreads wider and kept investors cautious.

"It's terrible again," a New York-based trader said.

The Markit iTraxx SovX CEEME ex-EU index spread on Thursday widened 7 basis points to 218 bps over Treasuries while the Markit iTraxx Crossover index - sighted at 435 bps over Treasuries on Tuesday - moved to 447 bps on Thursday.

"The risk-off mood continues," a London-based analyst said. "The Turkey sovereign is 5 bps to 8 bps wider and Russian and Turkish corporates are getting hit."

"The flow this morning is 80% to 90% bids wanted. Seen some accounts looking at extension trades, which makes sense, given the steepening, but we could also move steeper further," a London-based trader said. "The market is very defensive, apart from some short-dated and sticky bonds."

He was keeping an eye on Dolphin Energy's 2021s, which from November to May moved 80 bps tighter. The notes have moved back out that same amount in the last month alone.

"Bahrain is really very well offered," the London trader said. "The credit is 30 bps to 40 bps wider on the week as the 2020s trade at 107."

Dubai Holding's notes were outperformers on Thursday, with the company's 2014 euro notes holding well and unchanged on the week, he said.

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