Turkey, Russia CDS tighten; risk appetite grows, but flows limited; Asian issuers on tap

By Christine Van Dusen

Atlanta, Oct. 14 – Cash spreads for emerging markets bonds opened on Tuesday mostly unchanged as investor sentiment improved and the asset class kept up with U.S. Treasuries.

But flows were limited following Monday’s Columbus Day holiday in the United States.

Credit default swaps for Turkey and Russia tightened by 2 basis points in the morning, a London-based analyst said.

“The tone in Russia yesterday benefitted from the positive political developments over the weekend,” he said, pointing to the artillery silence period and the removal of Russian troops from the border with Ukraine.

“But again, overnight, we have seen reports of fighting at Donetsk Airport and in Luhansk,” he said.

Looking to Latin America, corporate bonds showed little reaction to the market and volumes were light, a New York-based trader said.

Buying slightly outpaced selling, though the mix was mostly even, he said, and high-grade names from Brazil were just a touch stronger.

Meanwhile, bonds from Colombia remained volatile amid strong liquidity, he said, and Mexico’s Cemex SAB de CV struggled.

In deal-related news, three Asian issuers – Korean Reinsurance Co. Ltd., Power Construction Corp. of China and China’s Yunnan Energy Investment (Overseas) Co. Ltd. – set talk for upcoming deals.

Korean Reinsurance set talk in the 4.65% area for its upcoming issue of $200 million notes due in 30 years, a market source said.

HSBC and JPMorgan are the bookrunners for the Regulation S deal.

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