Greece news boosts EM, but bailout terms are tough; bonds from Asia, Latin America tighten

By Christine Van Dusen

Atlanta, July 13 – Emerging markets assets strengthened on Monday on the news that euro zone leaders will give Greece up to $96 billion in bailout funds if the troubled sovereign adopts significant austerity measures – measures that Greek voters opposed in last week’s referendum.

Asian credits started out on Monday “a touch softer” prior to the agreement in Greece, a London-based trader said.

“The afternoon session market turned around as euro zone leaders started leaking that an agreement with Greece had been made,” he said. “Investment-grade cash soon followed, and closed the day 3 bps to 5 bps tighter.”

Bonds from Korea were quiet, though the Korea Export-Import Bank (Kexim) curve was 3 bps tighter, he said.

“India is 5 bps tighter,” he said.

Spreads for Middle Eastern bonds performed as rates moved lower on the back of the Greece headlines, a London-based trader said.

From Latin America, low-beta spread ended the day tighter, buoyed by a rally in risk assets, on a day of quiet flows, a New York-based trader said.

Five-year credit default swaps spreads for Brazil finished Monday at 252 bps from 256 bps while Mexico's moved to 125 bps from 127 bps.

Prices were close to Friday's levels, he said.

Bonds from Venezuela moved lower while Argentina continued to trade in a higher range, he said.

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