EM bonds tighten on ECB’s decision to institute QE; Ukraine and Russia conflict continues

By Christine Van Dusen

Atlanta, Jan. 23 – Investors on Friday continued to digest the European Central Bank’s decision to implement significant quantitative easing while Russian credit default swaps moved 25 basis points wider on increasing tensions with Ukraine, a London-based analyst said.

The recent meeting of foreign ministers failed to produce any material change for the conflict with Russia, he said, and a separatist leader has said he has ruled out trying to arrange a ceasefire.

Still, Russian bonds managed to benefit from the European Central Bank remarks, which narrowed credit default swaps by 25 bps, he said. And Russian bank bonds tightened by an average of 62 bps on the week.

“Euro paper actually generally underperformed,” he said, noting that Gazprombank’s 2018s widened by 3 bps.

“Russian corporates were 63 bps tighter on average,” he said. “High-beta names generally performed better as well.”

From Turkey, credit default swaps finished the week about 4 bps tighter, he said, after the Central Bank cut rates. And bank bonds tightened by about 6 bps.

Looking to Central and emerging Europe, the 2018 bonds from Lithuania narrowed by 4 bps.

“Dollar bonds also tightened, but performance was not as strong as euro assets,” he said.

In deal-related news, South African electricity provider Eskom Holdings SOC Ltd. and Mexican passenger bus and cargo line Grupo Senda Autotransporte SA de CV set roadshows for the coming week.

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