EM debt weaker on move up in rates; Romania prices; new Colombia notes flat to lower

By Rebecca Melvin

New York, Oct. 4 – Emerging markets debt was weaker again on Thursday as U.S. Treasury yields moved up strongly for a second straight day, but the EM primary market remained active.

Debt prices were all lower, and spreads were “a mixed bag,” said a trader, who is focused on Middle East and Africa debt.

Longer dated, lower-beta names were the hardest hit in cash price terms, including South Africa, but Lebanon and Bahrain were well bid, the trader said.

The yield on benchmark 10-year Treasuries climbed to 3.20% as more U.S. economic data showed better-than-expected strength. The sell-off in Treasuries started on Wednesday.

But the emerging-markets primary remained robust. Romania launched €1.75 billion of notes in two tranches, including 10- and 20-year notes. Final pricing and allocations were expected to be set late in the day, according to a syndicate source.

The €1.15 billion of 10-year notes priced with a yield spread of mid-swaps plus 195 basis points.

The €600 million of 20-year notes priced with a yield of mid-swaps plus 270 bps, which was tight compared to guidance of mid-swaps plus 275 bps area and initial talk in the area of mid-swaps plus 280 bps.

In first-day trading, Colombia’s combined $2 billion in new 10-year notes and a tap of its 5% notes due 2045 were flat to lower.

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