Emerging market debt paused ahead of U.S job numbers; liquidity thins out

By Reshmi Basu, Paul Deckelman and Paul A. Harris

New York, Dec. 7 - Emerging market debt went into lockdown Thursday ahead of Friday's pivotal release of non-farm payrolls data in the United States.

Investors will be dissecting the job numbers for any indication as to which way the U.S. economy is heading. Additionally, those numbers have the potential to shift the direction of U.S. core financial markets, which will in turn impact emerging markets trading Friday.

Additionally, sources noted that liquidity has tapered off this week. Wednesday saw low volumes as many participants took off for the annual Emerging Markets Traders Association meeting in New York.

A trader who specializes in Latin American sovereign debt said that market conditions were similar to Wednesday.

He added that "spreads are generally a little bit tighter, but no really large volumes and no really outsized moves."

He noted that the market trend seems to be to tighten slightly.

Nothing really stood out, he said, with everything trading "within a couple of basis points of each other."

Another trader, who also focuses on Latin American names, said things "seemed pretty quiet in terms of market movement today [Thursday]."

He said that sovereign bonds generally opened higher in the morning, but eventually erased their gains.

Overall, Latin American credits closed at or slightly below Wednesday's closing levels.

Ahead of Friday's jobs numbers, a third trader said very few investors were taking large positions on Thursday.

For instance, he observed that the bellwether Brazilian bond due 2040 was seen unchanged at 133.15 bid, 133.25 offered.

Ecuador down, Turkey bolstered by Cyprus initiative

Nonetheless, there were winners and losers on the day.

Ecuador was crowned as the session's underperformer while both Turkey and Argentina saw higher prices.

Ecuador's debt has been depressed in recent sessions by uncertainty surrounding comments made by president-elect Rafael Correa regarding debt negotiations.

In trading, the Ecuadorian bond due 2012 gave up 2 points to 93.25 bid

Meanwhile, Turkey saw its prices lifted as Ankara moved to open a port and an airport to Cyprus in hopes to get its membership talks with the European Union back on track.

The European Union described the step as positive but insufficient.

But Ankara's proposal was enough to boost investors' enthusiasm for the sovereign as bonds traded higher across the Turkish curve.

In trading, the Turkish bond due 2030 surged 1.75 to 154.125 bid, 154.50 offered.

Elsewhere, the Argentine discount bond due 2033 moved up by 0.55 to 102.90 bid, 103.20 offered.

Petrocommerce sells $300 million notes

On the primary front, Russia's OJSC Bank Petrocommerce placed a $300 million offering of three-year fixed-rate notes (Ba3/B+) at par to yield 8¾% via ING and Merrill Lynch.

The deal came in line with price talk of the 8¾% area.

Elsewhere, China Fishery Group Ltd. talked its $200 million offering of seven-year senior notes (B1) at the 9 3/8% area.

HSBC has the books for the Rule 144A/Regulation S offering.

The notes come with four years of call protection.

The issuer is a Hong Kong-based company that manages and operates fishing vessels for coastal and deep sea industrial fishing.

And moving to the subcontinent, the State Bank of India set a $300 million to $350 million size range for its offering of five-year eurobonds (Baa2/BB+/BBB-) on Thursday.

The deal was initially announced at $300 million.

Meanwhile the New Delhi-based state-run bank put out revised price guidance of three-month Libor plus 50 basis points area, lowered from previous guidance of Libor plus 50 to 55 basis points.

Pricing is expected to take place on Friday in London.

Barclays Capital, Citigroup and Deutsche Bank have the books for the Regulation S deal.

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