April 12, 2016 / 10:12 AM / 2 years ago

EMERGING MARKETS-Turkish bonds extend gains; weak dollar lifts emerging assets

By Claire Milhench
    LONDON, April 12 (Reuters) - Turkish bonds and the lira
extended gains on Tuesday, with yields at five-month lows,
signalling markets' approval of a compromise candidate to head
the central bank, while other emerging assets also mostly firmed
thanks to a weaker dollar.
    MSCI's emerging equity index rose 0.5 percent to eight-day
highs, extending gains into a third day benefiting from global
equity gains, firmer commodities and positive political
developments in a range of developing countries. 
    The lira firmed 0.2 percent against the dollar after
Monday's appointment of Murat Cetinkaya as the new central bank
chief relieved investors, who had feared a power struggle over
the nomination. 
    Local bonds rallied to five-month highs, with yields falling
between 6 and 13 basis points across the curve as fears faded
that a new governor would heed the president's regular calls for
significant rate cuts. Yields fell 14-20 bps on Monday after the
    Yield premia paid by Turkish dollar bonds over U.S.
Treasuries also narrowed by 8 bps on the day to three-week lows
of 286 bps.
    "The new governor has a pretty good reputation -- he won't
be pushed over easily and cut interest rates too fast. He's a
prudent monetary policymaker," said Per Hammarlund, chief
emerging markets strategist at SEB.
    Most emerging assets firmed as the dollar index retreated to
seven-month lows.
    The Brazilian real firmed 0.2 percent after
strengthening almost 3 percent on Monday when a Congressional
committee voted to recommend the impeachment of President Dilma
Rousseff. A vote in the full lower house is
expected to take place on Sunday.
    Brazil's London-listed exchange traded equity fund 
jumped 2.3 percent on Tuesday to its highest level since last
    Five-year credit default swaps (CDS) for both Turkey and
Brazil slipped three bps on the day to 371 bps -- near one-week
lows -- according to Markit.
    Analysts at BNP Paribas said fair value for Brazil's 5-year
CDS was around 320 bps and added: "Given the dichotomy between
market prices and the CDS theoretical fair value, we recommended
selling 5-year CDS."  
    A rally in oil prices to above $43 a barrel helped
lift Russian dollar-denominated stocks 0.27 percent
while firmer metals prices boosted South African
stocks 0.63 percent.
    The rouble firmed 0.6 percent against the dollar and
the rand gained 0.22 percent.  
    "It's a broad EM rally that is lifting all boats, even South
Africa," said Hammarlund. "There are no clouds in the sky for
emerging markets right now -- the PMIs last week were strong or
better than expected and that has carried into this week."
    He added that fewer worries about China, a relatively dovish
U.S. Federal Reserve, and easy monetary conditions in Europe
were all underpinning positive sentiment. 
    But Ukraine's restructured dollar bonds weakened slightly,
giving up the previous day's gains as investors awaited the
formation of a new cabinet following the resignation of Prime
Minister Arseny Yatseniuk at the weekend. 
    Lawmakers said Finance Minister Natalia Yaresko would not
remain in government. Yaresko is popular with investors
    "The most important factor is for both the PM and the
President to speak with one voice in order to secure not only
further IMF fund releases but also to provide for some sort of
resolution impulse in eastern Ukraine," Simon Quijano-Evans,
chief EM strategist at Commerzbank said in a note. 
    For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t
    For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s
    For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s
    For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s
    For CENTRAL EUROPE market report, see 
    For TURKISH market report, see 
    For RUSSIAN market report, see )
     Emerging Markets Prices from Reuters            
 Equities                  Latest    Net Chg  % Chg  % Chg      
                                                     on year    
 Morgan Stanley               
 Emrg Mkt Indx    828.46    +4.45   +0.54   +4.32     
 Czech Rep            888.31    -5.25   -0.59   -7.11     
 Poland           1907.34    -6.88   -0.36   +2.59     
 Hungary           26004.01  -264.41   -1.01   +8.71     
 Romania           6718.95    +7.03   +0.10   -4.07     
 Greece              548.90   -12.07   -2.15  -13.06     
 Russia             902.58    +1.60   +0.18  +19.22     
 South Africa   45542.53  +336.20   +0.74   -0.56     
 Turkey          83965.05   -22.48   -0.03  +17.06     
 China             3024.53    -9.43   -0.31  -14.54     
 India           25133.02  +110.86   +0.44   -3.77     
 Currencies              Latest    Prev    Local    Local       
                                   close   currency currency    
                                           % change % change    
                                                    in 2016     
 Czech Rep      27.01     27.02   +0.00    -0.06      
 Poland          4.29      4.27   -0.32    -0.63      
 Hungary       311.57    311.45   -0.04    +0.99      
 Romania         4.47      4.46   -0.08    +1.13      
 Serbia        122.72    122.70   -0.02    -1.02      
 Russia            66.28     66.65   +0.55   +10.06      
 Kazakhstan       335.37    336.20   +0.25    +1.53      
 Ukraine           25.45     25.50   +0.20    -5.89      
 South Africa      14.70     14.72   +0.18    +5.22      
 Kenya            101.10    101.00   -0.10    +1.09      
 Israel             3.76      3.76   -0.19    +3.32      
 Turkey             2.83      2.83   +0.11    +3.12      
 China              6.46      6.46   -0.01    +0.52      
 India             66.48     66.28   -0.30    -0.42      
 Brazil             3.48      3.49   +0.18   +13.62      
 Mexico            17.58     17.63   +0.32    -2.33      
 Debt                 Index   Strip Spd  Chg   %Rtn   Index     
 Sov'gn Debt  EMBIG   433        -4    .04  7 08.14 1   

 (Editing by Pritha Sarkar)
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below