EM credits weaker as U.S.-North Korea tensions mount; Venezuela recoups after sanction news

By Rebecca Melvin

New York, Aug. 9 – Emerging markets regained some ground on Wednesday after early weakness amid worries over an escalation of tensions between the United States and North Korea. Market activity was low, however.

An early bid for U.S. Treasury bonds left emerging markets spreads wider by about 5 to 7 basis points early on but came in to about 3 or 4 bps wider by the end of the day, a New York-based trader said.

Turkey and South Africa were each about 5 bps wider in cash bonds and credit default swaps, Andrew MacFarlane, a credit strategist for BNP Paribas told Prospect News.

A second source concurred that negative political headlines resulted in some profit taking.

In Latin America, markets were also generally weaker, but Cerro del Aguila SA priced $650 million of 10-year senior notes at a yield that was tight compared to initial talk and that edged up after it was released for secondary market trading.

Back in established issues, other yield names such as Corporacion Nacional del Cobre de Chile moved wider with other investment-grade names, a New York-based trader said.

Venezuela and Petroleos de Venezuela SA were trading weaker for a second straight day amid rumors that the United States was about to impose more sanctions against the country.

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