Midday Commentary: EM paper tightens; Turkey's Bank Asya outperforms; Middle Eastern bonds strong

By Christine Van Dusen

Atlanta, March 28 - Emerging market bonds ended the week mostly tighter as deal flow slowed, Ukraine-related anxiety lessened and investors focused on moving into the next month.

"[EM] has enjoyed consistent tightening this week on a combination of no further sanctions on Russia, no issuance, and the end-month effect," a London-based analyst said. "Once we enter April, with the potential for volatility after the Turkish local election this weekend, EM may well take a different path."

Trading for the last few weeks has been a bit directionless and opportunistic, she said.

Most banks from Russia ended the week 29 basis points tighter, though Credit Bank of Moscow's 2018s outperformed, narrowing 66 bps, she said.

That bond was "helped by news it had signed a $500 million syndicated loan facility," she said. "An obvious concern for Russia, going forward, will be access to funding from banks, especially if sanctions tighten further."

Bonds from the short end from Gazprombank also tightened, with the 2015s moving in 83 bps.

"Investors took advantage of mis-pricings in the aftermath of the recent sell-off," she said.

OAO Sberbank's 2024s, which have underperformed in recent weeks, also stood out on Friday.

"We still see value in the bonds," she said. "Russian corporates were also tighter."

OAO Gazprom was an underperformer by Friday as a result of continuing concern about Ukraine.

Turkey tightens

Bonds from Turkey were tighter by Friday, even as political tension increased related to local elections, the analyst said.

"This weekend's local election will have a clear impact on direction going forward," she said.

Sovereign bonds narrowed, with the 2024s tightening by 34 bps.

Turkish banks managed to tighten 29 bps at the end of the week, with Asya Katilim Bankasi AS (Bank Asya) 2023s narrowing dramatically by 300 bps on the news that Qatar Islamic Bank could make a strategic investment.

"Good performance of short-end Akbank as the curve normalizes," she said. "Turkish corporates were more mixed, 7 bps tighter on average."

Middle East continues rally

Bonds from the Middle East continued to rally on Friday, with most paper tightening, a trader said.

This has been helped by the lack of issuance in the sector, she said.

"Middle Eastern banks were 18 bps tighter on the week, with very strong performance from perpetuals like Dubai Islamic Bank and Abu Dhabi Islamic Bank," she said.

Abu Dhabi Commercial Bank underperformed, she 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.