Morning Commentary: EM primary quiet; secondary sees light volume as market eyes September

By Rebecca Melvin

New York, Aug. 18 – The emerging primary market remained quiet early Friday as it has been for much of the past week, with nothing telegraphed for pricing next week, and instead market players were beginning to look ahead to Sept. 5, the day after the U.S. Labor Day holiday, which marks the unofficial end of summer.

“It’s still quiet in the primary markets for the next two weeks, but expect it to be busy from Sept. 4 onwards,” a London-based syndicate source said.

The emerging secondary markets were also quiet with little movement in pricing or spreads.

“No pricing on screens, it’s going to be a very quiet day,” a Connecticut-based trader said.

In fact, the whole week was uneventful as the summer vacation season kept many market players away from their desks.

“We went through a relatively uninspiring week with a lack of meaningful headlines and little flow in EM credit. Despite EPFR reports of a miniscule outflow ($79 million), the market still feels better bid with fears of an armed conflict on the Korean peninsula abating,” according to a report published Friday by MUFG.

EPFR Global reported a $166 million outflow for EM hard-currency bond funds for the week ended Aug. 16. For all EM bond funds, there was a $56 million outflow for the week, compared to a $1.29 billion inflow for the previous week. Local currencies saw an outflow of $51 million.

Meanwhile, J.P. Morgan’s weekly EM fund flows saw a small inflow of $82 million driven by actively managed funds, a source reported. The JPMorgan flow tallies saw an outflow in hard-currency funds of $139 million, compared to an inflow of $582 million the previous week.

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