EM credit remains weak as Fed unveils ‘new normal’; Vivo cancels due to ‘adverse’ market

By Rebecca Melvin

New York, June 13 – Emerging markets credit remained weak on Wednesday after the U.S. Federal Reserve raised its short-term interest rate another 25 basis points and signaled that four rate hikes are in the cards for this year, not two or three as some emerging market players had hoped.

With the stage set for faster rate hikes, “it’s not a great day in the market, but in some ways this was pretty much expected. If rates go up it will put pressure on local currencies and their bonds; this is the thing that everyone had been dreading,” a New York-based Latin America syndicate source said.

“Hopefully the market will digest this and be okay with the new normal. And hopefully we get a couple of days of stability to price the deals in the pipeline,” the source said.

One deal on the calendar is that of Frontera Energy Corp. There was no word yet whether the offering of $500 million of five-year notes was pricing.

This week the emerging markets secondary has been particularly heavy and the primary largely sidelined amid concerns about the Federal Open Market Committee.

Vivo Energy plc announced early on Wednesday that it has decided not to proceed with a planned issue of notes at this time due to adverse market conditions.

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