Greeks oppose bailout terms; risk-off mood persists; Lat-Am mixed, Asian bonds mostly wider

By Christine Van Dusen

Atlanta, July 6 – Trading of emerging markets bonds was limited on Monday – with Latin America names mixed and Asian bonds mostly widening – after Greek voters overwhelming opposed lenders’ conditions for another bailout and the Greek finance minister resigned.

“It’s risk-off in Asian credits after Greece voted ‘no’ to austerity,” a London-based trader said. “Investment grade cash started the day 3 basis points to 5 bps wider with little selling. The overall tone was defensive but orderly.”

Among sovereign bonds from Asia, Indonesia and Pakistan were the most active, he said.

“But the overall tone was still relatively weak, given the bonds cheapened against the Treasury strength,” he said.

Bonds from Central and emerging Europe, the Middle East and Africa were wider but “fairly muted and lackluster” during the session, another London trader said.

From Latin America, low-beta spreads ended the day wider, with five-year credit default swaps spreads from Brazil closing at 261 bps versus 254 bps and Mexico at 131 bps from 128.50 bps, a New York-based trader said.

Cash prices tried to keep pace with Treasuries, he said, and held up “relatively well in the face of negative headlines out of Europe.”

High-yield names from Latin America were mixed, with Argentina moving higher and Venezuela dipping, he said. Venezuela suffered mostly due to the change in oil prices.

Flows, overall, were somewhat quiet but balanced, he said.

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