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Turkey, South Africa tighten in moderate volume as market awaits new issue calendar
By Paul A. Harris
Portland, Ore., Jan. 2 – Emerging markets debt traded well on moderate volume as 2018 got underway Tuesday, a London-based trader said.
Most sovereign and corporate names were five basis points to 15 bps tighter on the session.
Turkey and South Africa were both 10 bps tighter, the trader said.
In the Latin American space, the deeply distressed debt of Venezuela was back in the spotlight as S&P lowered the sovereign bonds due 2018 to D from CC after the government failed to make $35 million in coupon payments within a 30-day grace period which ended on Dec. 31, a market source said.
Venezuela bonds, as well as paper issued by Petroleos de Venezuela, SA (PDVSA) were 2 points to 5 points lower on the day.
The Venezuela 8¼% bonds due 2024 were generically 20¼ bid, the source said.
The PDVSA 9¾% bonds due 2035 were generically 25¾ bid.
Awaiting a calendar
There was no news about January new issue supply on Tuesday, the trader said, and added that none was to be expected so early in the new year.
However there could be new issue activity early in the Jan. 8 week, the source added.
Technical and fundamental factors would appear to support an active new issue market, the source added.
On the technical side, emerging markets investors have cash to put to work, the trader said.
As to fundamentals, rallying energy prices should provide a positive backdrop for EM new issue activity.
For the first time since 2014 the barrel price of West Texas Intermediate crude oil opened the year above $60, market sources say.
WTI futures were up 3.3% in the final week of 2017, and ended the year 12% higher than they were at the close of 2016.
Emerging markets is still an energy sensitive asset class, the London-based trader said, adding that prices have been very supportive.
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