Morning Commentary: Oil dips; risks seen for Russia, PrivatBank bonds; Turkey holds rates steady

By Christine Van Dusen

Atlanta, Dec. 21 – Emerging markets assets were mostly flat on Wednesday – with risks seen for Russian bonds – as oil prices inched lower and investors and issuers looked ahead to the Christmas holiday and year-end.

Brent crude oil futures on Wednesday morning dipped by 30 cents to $55.05 per barrel on the report that inventories in the United States have risen by a surprising 2.3 million barrels.

Against this backdrop, the market was expected to consolidate, according to a report from Schildershoven Finance BV.

Turkey remained in focus, with the central bank holding rates steady, a move that “may be positively assessed by the market, as investors had predicted some policy tightening,” the report said. “The main risk for most investors is the lira dynamics.”

Risk was also seen for eurobonds from Russia's AK Bars Bank OJSC, following the report that troubled lender Tatfondbank did not pay a coupon on its bonds due Wednesday.

“Many investors have relied on possible support from the Tatarstan government,” the report said.

Looking to Ukraine, bonds have traded well so far this week, though a Tuesday rally slowed and two-way action picked up after the government took over PrivatBank to keep it from failing.

“PrivatBank bonds continued to weaken in a very wide bid-ask context,” said Svitlana Rusakova of Dragon Capital (Cyprus) Ltd. “Other than that, it was a slow pre-holiday session with little interest in quasi-sovereigns and corporates.”

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