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Morning Commentary: EM spreads widen after ECB meeting; liquidity limited for Latin America
By Christine Van Dusen
Atlanta, Sept. 3 – Spreads for many emerging markets bonds were wider on a quiet Thursday morning as China went on holiday and the European Central Bank met and said it would keep benchmark interest rates unchanged.
The ECB also indicated that it was willing to bump up its stimulus programs if the deterioration in the global economic picture hurt the bank’s ability to increase its inflation target.
“The big highlight remains the payrolls report tomorrow,” a trader said. “We are still waiting for a pick up for eurobond issuances in [EM].”
From Latin America, spreads for corporate bonds like Brazil-based Petroleo Brasileiro SA were wider, particularly on the long end of the curve, a New York-based trader said.
“Brazil high-grade has been very quiet the last few days,” he said, noting that Braskem SA and Gerdau SA were among the few issuers to trade with any regularity or liquidity. “Both [were] trading quite stable, as well.”
Colombia’s Ecopetrol SA, which recently had been a very active credit, was quiet but stable on Thursday, he said.
“They're down 4 points to 6 points the last month,” he said.
Chile-based Corporacion Nacional del Cobre de Chile (Codelco) spreads held firm in the belly of the curve, even after Standard & Poor’s revised its outlook to negative, he said.
“The Street remains short in that area,” he said. “The longer end has bounced around in a 10 bps range.”
And high-grade names from Chile were weaker than in previous weeks, but still “trading well,” he said.
In other trading, bonds from Ukraine have performed strongly so far this week, said Fyodor Bagnenko, a fixed income trader with Dragon Capital.
“Quasi-sovereigns slowly caught up as well,” he said.
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