Buyers lift EM debt again in light volume; MENA mostly tighter, but Bahrain underperforms

By Rebecca Melvin

New York, July 6 – Investors turned buyers of emerging markets debt this past week, lifting prices for a third straight day – albeit on slim summer volume – on Friday as markets quieted into the weekend amid distractions like the soccer World Cup and vacations, a London-based trader said.

Volume was also curbed by the holiday-shortened week in the United States where financial markets were closed on Wednesday in observance of Independence Day.

“There’s decent buying,” the trader said, noting South Africa and other Africa sovereigns were doing well, as were Egypt and other high-beta Middle East names. But Bahrain was a laggard.

African spreads were tighter by 15 basis points to 25 bps, but Bahrain was wider by 5 bps to 10 bps, the trader said.

Bahrain’s sovereign credit curve, which saw a weaker short end compared to the long end on Friday, has been volatile this past week as investors weighed headlines regarding the Kingdom’s constrained finances.

In Latin America, Mexico’s bonds improved this past week after a weaker Monday as the market responded to the as-expected victory of Andres Manuel Lopez Obrador, or AMLO, of the National Regeneration Movement, in the country’s presidential election on Sunday.

Brazil’s bonds were also doing better on Friday, but its path ahead politically is far less certain.

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