Emerging markets trip into week; Shinhan Bank prices $500 million bonds; spreads widen

By Aaron Hochman-Zimmerman

New York, June 22 - Emerging markets continued a losing streak Monday that extended from the previous week's trading.

South Korea's Shinhan Bank was nearly four times oversubscribed as it priced $500 million of bonds, but the paper performed poorly in trading.

"It was a pretty bad day, generally," a buysider said.

The higher-yielding credits were hurt by spillover risk aversion from the major markets.

"There's nothing really EM specific," the buysider said. "It's all risk related."

Sentiment was helped slightly by the 10th straight week of inflows for emerging market bond funds, according to data compiled by EPFR Global.

Still, "with the spread between U.S. Treasuries and JPMorgan's benchmark EMBI+ index rebounding from 412 basis points to more than 435 bps, emerging markets bond funds specializing in hard currency debt accounted for the bulk of the week's inflows, which fell to an eight-week low," EPFR said.

Further than 435 bps, investors turned away from risk, and emerging markets widened by 18 bps to a spread of 458 bps, according to JPMorgan's EMBI+ index. The EMBI+ calculates the amount of extra yield investors will demand to hold assets in emerging market debt.

Meanwhile, equities sold off and volatility spiked back up over 30.00 as a jump of 3.18 ended the day at 31.17, according to the VIX index. The index is an often used gauge of market volatility.

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