Morning Commentary: EM debt improves as currencies, broader markets recover; but new issues absent

By Rebecca Melvin

New York, June 20 – Emerging markets debt improved on Wednesday after weakening on Tuesday when a global rout hit the space. But the market wasn’t solid enough to yield new issuance, according to market sources.

Many emerging markets currencies also strengthened on Wednesday, including the South African rand and the Brazilian real, which was a little shaky in the early going but appeared ready to consolidate after a plunge heading into the close on Friday.

“It’s a little firmer, but I don’t expect any new issues this week,” a London-based market source said of the Central & Emerging Europe, Middle East and Africa region.

An exception to the general strength was Turkey. Its bonds and the lira weakened for a second straight day amid investor worries over that country’s road to reigning in inflation.

Ahead of the country’s presidential election on Sunday, president Recep Tayyip Erdogan pledged to lower interest rates if re-elected.

In addition to currencies and stocks, crude oil prices improved on Wednesday and were last up more than 1%.

Petroleo Brasileiro SA’s bonds were moving higher on Wednesday.

Petrobras’ 7 3/8% notes due 2027 were at last around 99, which is up about half a point on the day.

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