Ukraine, Greece take positive steps, sentiment improves; Asian bonds strengthen

By Christine Van Dusen

Atlanta, Feb. 13 – Investors on Friday remained focused on Ukraine and Greece as leaders hammered out agreements that could lead to more stability for the embattled sovereigns – political for the former and financial for the latter.

Some market-watchers were encouraged by progress between Greek and European negotiators, who seem closer to agreeing on a deal related to Greece’s bailout.

“Risky assets in Europe are firmer today as a result,” according to a report from Barclays Capital.

And the ceasefire in Ukraine was still scheduled to take effect on Sunday, which also boosted some emerging markets bonds.

“Investors will likely form into two groups – those who think this is the beginning of the end of the Ukrainian conflict, and Russian sanctions as a result, and those who think that the Minsk II agreement is destined to fail just like Minsk I,” a London-based analyst said. “The rest of [emerging markets] benefited from the agreement and better risk tone.”

Russian credit default swaps spreads ended the week 35 basis points tighter, with the strongest moves occurring alongside Wednesday’s and Thursday’s negotiations.

“In the sovereign curve, certain front-end bonds performed particularly well, up to 74 bps tighter,” He said. “Russian banks were 53 bps tighter on the week.”

Bonds from Turkey – which recently suffered as oil prices bounced, rates rose in the United States and uncertainty about monetary policy in Turkey grew – managed to rebound at the end of the week on the improved risk tone, he said.

“Credit default swaps end the week 2 bps tighter,” he said.

Looking to Serbia and Croatia, bonds were under pressure, with Croatia’s 2021s widening by 16 bps, a trader said.

“Elsewhere, euro paper remained robust, particularly Hungary, which rallied,” he said. “Dollar paper was more mixed, but generally wider on the week.”

Middle East mixed

Bonds from the Middle East were mostly mixed during the week, the analyst said.

“Financials were 2 bps wider, on average,” he said. “Very mixed performance from the perpetuals, with the old Dubai Islamic Bank perpetual 32 bps tighter, supported by the technical squeeze, although the new Dubai Islamic Bank perpetual has struggled to move past par.”

Other perpetuals also struggled, including Abu Dhabi Islamic Bank PJSC and Kuwait’s Burgan Bank.

“The new National Bank of Abu Dhabi 2020s have traded well since issuance, 3.5 bps tighter on the week,” he said. “Corporates were 4 bps wider on the week.”

Asia in focus

Bonds from Asia put in a strong session by Friday, closing a busy week of buying and spread-tightening for high-grade names.

China-based Sinochem Group’s 2020s outperformed while Export-Import Bank of Korea’s 2025s tightened by a few basis points, a trader said.

“India spreads were selectively tighter,” he said.

Kasia still under pressure

Among high-yield names, many property companies from China moved 1/8 point to ½ point higher but Kaisa Group Holdings Ltd. remained under pressure, moving down 3 points, a trader said.

The company continues to grapple with a corruption investigation, which has bond investors worried that the property developer could be heading to a default.

“The 2018s to 2020s were trading slightly above the 60s in the morning before bouncing up about 2 points from the lows in the afternoon,” he said. “Kaisa’s 2020s traded in a range of 59 to 64 for the day.”

High-yield sovereigns from Asia, meanwhile, rallied on Treasury moves, and Indonesia’s long end moved up 1 point to 1¼ points higher. The Philippines’ long end inched ¾ point higher, he said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.