New deal from Lithuania; EM assets remain firm; Petrobras suffers after Brazil downgrade

By Christine Van Dusen

Atlanta, Oct. 15 – Lithuania sold notes on a firm Thursday for emerging markets assets, as the prior day’s weak economic releases boosted emerging markets currencies and supported credit.

“Emerging markets remain firm, even with developed market risk under pressure as the United States growth story is stagnating,” a trader said. “Fed rate hike expectations are just being pushed further and further away.”

Sovereign bonds from Turkey were firm, even after the death toll rose from the recent bombing of a peace rally in Ankara and following news of a rise in the unemployment rate.

“Duration was generally bid,” another trader said. “As the curve had steepened, we saw good buying in the belly of the curve from clients and the Street paying in the long end.”

Turkish banks and corporates, which traded somewhat heavy at the start of the week, saw two-way activity with real-money accounts “lightening up into the elections on the rally and retail buying on dips,” he said.

From Asia, high-yield sovereigns tracked the move in Treasuries, with the Philippines curve moving up ˝ point and the long end trading up as much as one point, another trader said.

Corporates from Asia outperformed, he said.

Looking to Latin America, the market was a bit slow, with names like Brazil-based Petroleo Brasileiro SA (Petrobras) taking a hit after Fitch Ratings knocked Brazil down one notch.

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