Investors shun risk; EM spreads widen; eyes on Kazakhstan, Turkey, Greece; Lat-Am sees sellers

By Christine Van Dusen

Atlanta, Aug. 21 – Investors avoided risk as weakness continued for Asian assets on Friday – following disappointing economic data from China – amid concerns remained about the global economic picture and oil prices remained under pressure.

Also contributing to volatility on Friday was the evolving picture in Greece and the devaluation of Kazakhstan’s currency.

“Asian credits continued to sell off, with investment-grade cash closing 3 basis points to 8 bps wider,” a London-based trader said. “Very cautious tone, with most accounts either sidelined or trimming non-core risk.”

Some sellers were seen at the London open, and oil-related credits from China held in well, he said.

Asian bonds weakened considerably as Friday’s session wore on, another trader said, as investors remained reluctant to add risk and oil prices continued to fall.

“Liquidity was sluggish today, and banks, auto and tech continue to leak wider,” he said.

Looking to Latin America, the curve for Chile’s bonds remained “extraordinarily steep” on Friday, a trader said.

Short-dated bonds from Brazil were well-offered during the session, another trader said.

And Mexico’s bonds faced “appalling liquidity,” a trader said. “Hard to say where anything is, particularly in the long end.”

In the afternoon, Latin American bonds saw a little bit of buying, another trader said.

“But the overwhelming majority of flows are still sellers,” he said.

Looking to Turkey, long-dated sovereign paper got a lift, leaving the bonds firmly bid on Friday morning, he said.

© 2015 Prospect News.
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