China tries to calm market; Indian bonds tighten; Lat-Am prices slump; Ukraine talks continue

By Christine Van Dusen

Atlanta, Aug. 13 – China devalued its currency for a third consecutive day and defended the decision during a Thursday press conference, which helped to calm investors’ nerves a bit and tighten some spreads while other bonds took a “breather.”

Also attracting attention on Thursday was the news that Ukraine had not reached a deal in its debt negotiations and was resuming talks. In response, trading of the sovereign’s bonds was somewhat muted, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Activity is a lot more subdued in [emerging markets], but some small bottom-pickers are in,” a London-based trader said.

Asian credits bounced back between 2 basis points and 5 bps, but the rally faded after the London open, another trader said.

China-based Alibaba Group Holding Ltd. underperformed, moving 5 bps wider on poor earnings, he said.

Bonds from India were 1 bps to 3 bps tighter, he said, and India-based Icici Bank Ltd.’s new 3 1/8% 2020s closed the Asian session at 164 bps bid, 159 bps offered after trading earlier this week at 158 bps.

Looking to Latin America, low-beta spreads widened on the day after moving tighter on the open, a New York-based trader said.

Five-year credit default swaps spreads for Brazil closed at 310 bps from 304 bps, while Mexico’s moved to 138 bps from 134 bps.

Cash prices “slumped” along with Treasuries, he said, and were better-offered throughout the afternoon at prices near Wednesday’s.

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