EM softer as rate moves remain in focus; primary mostly quiet; Energija, Liquid price

By Rebecca Melvin

New York, July 7 – Emerging markets were softer on Friday as turbulence in the thinly-traded financial markets this past week continued to weigh on investors.

The U.S. dollar-denominated primary market remained quiet, although Liquid Telecommunications Holdings Ltd. priced a downsized $550 million of 8½% bonds five-year senior secured bonds on Thursday while in euros only Lithuania’s Lietuvos Energija UAB priced a deal of €300 million of 2%, 10-year senior green bonds on Friday.

The Lietuvos Energija deal (/BBB+) priced favorably at mid-swaps plus 120 basis points, which was tighter than talk for a spread of 130 to 135 bps, and it was three-times oversubscribed, a market source said.

The markets have not gotten back up to full speed since the U.S. Independence Day break earlier this week.

In established issues, markets were heavy on Friday, a trader said, with more sellers than buyers.

An outflow from hard-currency emerging markets bond funds of $568 million was registered in the week ending July 5, according to tracking firm EPFR Global. But there was also an inflow into local-currency funds of more than a $1 billion, resulting in a net inflow into all emerging markets bond funds of $693 million for the week ending July 5.

A separate report showed $725 million was withdrawn from emerging markets fixed-income exchange-traded funds over the past week.

Nevertheless, deals were expected to be launched and priced next week in Latin America and elsewhere.

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