Morning Commentary: EM takes a breather after early week issuance; Belarus, Kenya trade up

By Paul A. Harris

Portland, Ore., Feb. 23 – The emerging markets had a supportive tone late in the Friday session in London, a trader said.

Spreads were slightly lagging Treasuries.

The primary bond market was quiet following a burst of issuance earlier in the week.

Sovereigns up smartly

A pair of sovereign deals that priced earlier in the week was performing nicely on Friday, a London-based trader said.

Republic of Belarus’ 6.2% notes due February 2030 were par 3/8 bid, par 5/8 offered on Friday.

The $600 million of 12-year paper priced at par on Thursday.

The deal saw pricing tighten from talk at 6½% and come at the long end of the contemplated 10- to 12-year profile.

New sovereign paper issued by Kenya was also turning in a solid performance in the secondary market on Friday.

The 7¼% notes due February 2028 were 101¼ bid, 101½ offered. The $1 billion tranche priced at par on Thursday.

The Kenya 8¼% notes due February 2048 were performing even better on Friday at 102½ bid, 102¾ offered. That tranche was also sized at $1 billion and also priced at par.

It's high-coupon sovereign paper that was priced to go, a trader said on Friday, and added that investors have lifted it up.

LatAm quiet

Meanwhile the Latin American space remains quiet, according to a trader.

Due to big early year elections in Mexico, Brazil and Colombia, 2018 has tended to be a front-loaded year, with issuers keen to get into the market ahead of any potential politically generated volatility.

Big Latin American issuers did what they needed to do, the source said.

As to Latin American corporates, there is apt to be a period of dormancy as companies in the sector are just getting started with earnings reports. Earnings from LatAm companies generally follow later than reports from North American corporations, the trader said.

As to any conspicuous damage stemming from the recent market volatility which took place against a backdrop of rising rates, the trade pointed to Argentina, which printed a whopping $9 billion of debt in January.

Recent volatility has made investors more cautious, so Argentina has underperformed, the source said, adding that the bonds are generally 50 basis points wider.

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