EM bonds mixed after FOMC raises rates; Turkey’s spreads narrow a touch

By Christine Van Dusen

Atlanta, Dec. 15 – Emerging markets bonds put in mixed performances on Thursday, following the Federal Open Market Committee’s decision to raise rates.

“Yesterday’s FOMC decision served as a wake-up call to some, as the board followed through with a fully priced-in, 25-basis points rate hike but also turned somewhat more hawkish, as evidenced by the Fed’s median projection,” a London-based analyst said. “Policymakers are now predicting three 25-bps hikes in 2017, up from two.”

The FOMC says that it’s “still too early to assess the impact of potential fiscal changes, but that those could certainly affect the economic outlook,” the analyst said. “As a consequence, the focus now shifts back to the Trump cabinet and agenda as we head into next year.”

In response to the FOMC news, emerging markets assets sold off overnight, but “the impact on EM credit is “more benign so far, with spreads partially compensating for the widening rates move on average,” he said.

Performance was mixed, with Turkey’s bonds moving only as much as 2 bps tighter.

Meanwhile, some market-watchers continued to keep an eye on Hong Kong-based Yingde Gases Group Co. Ltd., as the company continued to grapple with conflict between shareholders over who should maintain control.

Two directors issued an open letter to shareholders, proposing changes to the board and to solicit offers for share.

“Yingde Gases announced that the latest public letter issued by the former executive directors will not influence the company’s strategic plans,” according to a report from Schildershoven Finance BV. “According to the latest announcement, new shares issue will help the company to pay its short-term debt, reduce its cost of liabilities and improve Yingde Gases’ capital structure.”

Volatility in Yingde’s 2018 bonds is expected to be high.

© 2015 Prospect News.
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