Morning Commentary: Outflows cap shortened week; Lietuvos Energija prices green bonds

By Colin Hanner

Chicago, July 7 – Emerging markets were softer on Friday morning, capping a holiday-shortened week that saw “a decent move wider ... for once,” a market source said.

A report of outflows from funds for the week – a market source said emerging markets fixed-income ETF’s saw $725 million withdrawn over the week – was in line with the rise in 10-year Treasuries, which bounced to 2.369% on Thursday.

“The sell-off was mainly rates driven, with spreads, however, also wider on average,” a market source said.

The fund flow figures are expected to “remain in focus next week,” a market source said.

Also next week, on Wednesday and Thursday Federal Reserve chair Janet Yellen will testify to Congress.

As for new issues, Lithuania’s Lietuvos Energija UAB priced €300 million of 2% 10-year senior green bonds (/BBB+) at mid-swaps plus 120 basis points, tighter than talk for a spread of 130 to 135 bps. The offering was three-times oversubscribed, a market source said.

In the geopolitical sphere, U.S. secretary of state Rex Tillerson will travel to Kuwait on Monday following Qatar’s rejection of a list of demands for a Middle Eastern coalition.

The coalition, made up of Saudi Arabia, United Arab Emirates, Egypt and Bahrain, is “likely to announce further sanctions in the near future,” a market source said.

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