Emerging market debt at a standstill amid light volume; Woori Bank adds to the pipeline

By Reshmi Basu and Paul Deckelman

New York, April 2 - Emerging market debt saw a quiet session Monday, as volumes remained thin at the beginning of an abbreviated trading week.

Adding to the new deal pipeline, Seoul-based Woori Bank plans to issue a benchmark-sized offering of dollar-denominated hybrid bonds.

The bonds are expected to carry a 30-year tenor and will be non-callable for 10 years.

Credit Suisse, Merrill Lynch, HSBC, ABN Amro and Deutsche Bank are managers for the issue.

The deal is expected to price towards the end of the month.

EM flat on spread basis

Emerging market debt traded in tight ranges Monday amid light volumes as many investors continued to stay out of the trading game for the shortened week.

Overall, external and local debt markets in Latin America saw little activity in the absence of any credit drivers, according to market source.

On a spread basis the asset class was unchanged.

Among benchmark names, the Argentine discount bond due 2033 was unchanged at 116.55 bid to yield 6.75%. The bellwether Brazilian bond due 2040 gained 0.15 to 134.90 bid to yield 5.70%. The Ecuadorian bond due 2030 was unchanged at 89.00 bid to yield 11.35%.

"Trading is light today [Monday]," said a trader. "The market is having a hard time breaking out of this range," he added.

"But that being said, the category is well supported."

The asset class has bounced back from the prolonged sell-off seen in February. Moreover spreads are flirting with breaking the record low that was recorded right before the sell-off. Spreads for the JP Morgan EMBI Global index have contracted to 169 basis points versus U.S. Treasuries, only 2 basis points away from above the all-time low.

Even as risk aversion has increased on a murky U.S. economic outlook, the market is expected to remain resilient.

"Technicals are supportive," noted a buyside source.

Year-to-date, the market has seen some $4.1 billion in inflows, despite the high level of cash balances, according to an analyst. Additionally, amortization payments are expected to be twice the amount of new sovereign issues for the remainder of the year.

"Fundamentals are intact. In the near-term, spreads should remain range-bound with a bias towards tightening, given that commodity prices should remain high," the buyside source added.

Venezuela pressured, Colombia inflation rises

Meanwhile in country specific news, Venezuela's external debt market was pressured from new supply from state oil company PDVSA.

At the end of the session, the Venezuela bond due 2027 was lower by 0.25 to 125.50 bid for a yield of 6.90%.

Elsewhere, in Colombia, the country's inflation for March came above market expectations at 1.21%, which reinforced the view that the country's central bank will continue to raise rates at least another 25 basis points at its April 25 meeting.

In trading, the Colombian bond due 2033 gave up 0.20 at 144.90 to yield 6.70%.

Over to Peru, the country reported that inflation for March was 0.35%, coming in a tad below market expectations, according to a source.

During the session, the Peruvian bond due 2033 rose 0.25 to 131.85 bid to yield 6.27%.

And coming up Tuesday, Turkey is expected to release its CPI data for March. Market consensus has put the inflation number at 1%.

An analyst noted that if the number comes above 1.50%, there will be pressure on the sovereign's local and external debt markets.

In trading Monday, the Turkish bond due 2030 gave up 0.19 to 153.81 to yield 7.08%.

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