NEW YORK, Aug 27 (IFR) - Reduced expectations for a Fed lift-off in September and a sharp bounce in commodities had LatAm credits enjoying a rare rally on Thursday.
Debt issued by oil-rich Venezuela jumped as crude enjoyed an unusual 9% rally today. The sovereign’s 2022s were up almost three points at 43.75.
Brazilian debt was also putting in a strong performance after suffering a rout earlier this week on Chinese growth concerns.
The 2022s issued by country’s state-owned oil company Petrobras were trading back at 607bp, marking a 70bp tightening since Monday.
The sovereign’s benchmark 2025s were also up about two points at 93.25-94.00, or at a spread of around 305bp, some 35bp tighter on the week.
Longer term there is still some uncertainty surrounding emerging market debt which is expected to keep the new issue market quiet.
On the one hand, investors seem relieved that Chinese authorities had stemmed the sell off in their stock markets but on the other, no one is really certain about the direction these markets would take.
“Governments are not going to stay quiet in front of this (selloff) and that is providing some comfort to investors,” said Jorge Piedrahita, CEO of broker Torino Capital.
This week’s bout of volatility has flushed out some of the “weaker hands” in the market, providing some stability in prices, he added.
Investors have been selling on upticks in preparation for more redemptions after retail accounts took out some US$2.49bn from dedicated EM bond funds last week - the largest weekly outflows recorded by EPFR since January 2014.
Some are expecting an even larger number this week given the growing raft of negative headlines about emerging markets.
Elsewhere, Argentina bonds were inching higher, with the Boden 2015s climbing about a 1/4 point to 102.90 ahead of their maturity in October. “This is already a money market bond with Argentina risk,” said a trader. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)