EM rallies as investors rotate into riskier assets; Indonesia, Philippines trade higher

By Christine Van Dusen

Atlanta, Oct. 5 – Emerging markets bonds rallied on Monday, with many seeing two-way flows but little conviction in either direction, on the expectation that a rate hike from the United States lies further down the road.

“Coming off a volatile session on Friday we opened firm with a few prints higher in the Street,” a trader said. “Rates have given back some the rally but that’s due to better risk sentiment as rate curves steepen.”

Investment-grade bonds from Asia were unchanged to a couple of basis points tighter on Monday morning, but “gains were capped with outright sellers on recent issues into the rally,” he said.

China-based Cnooc Ltd.’s 2025 bond, for one, traded Monday morning at 197 bps, tighter by 2 bps.

“We have seen good demand for duration as investors strap on risk in the sovereign space,” another trader said.

Bonds from Indonesia and Philippines moved higher on the long end, a trader said.

“Rotation into riskier assets, as flight from quality seems to be the theme the last two days,” he said.

From Turkey, banks and corporates saw two-way activity on Monday, another trader said, while sovereign bonds tightened as much as 20 bps with good demand.

“And we have seen interest build as the sovereign remains firm,” he said.

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