Some EM rallies; light flows in Asia on holiday; Braskem weaker; Ukraine bonds perform

By Christine Van Dusen

Atlanta, Sept. 3 – Some emerging markets assets rebounded on Thursday while others saw spreads widen as China went on holiday and the European Central Bank said it would keep benchmark interest rates unchanged.

“Crude enjoyed another day of rebounding despite another weak initial jobless claim,” a London-based trader. “Despite light flow due to Hong Kong and China being closed overnight, the credit space was very well bid.”

From Latin America, spreads for corporate bonds like Brazil-based Petroleo Brasileiro SA were wider in the morning, particularly on the long end of the curve, before tightening into the close.

“Brazil high-grade has been very quiet the last few days,” a New York-based trader said, noting that Gerdau SA was among the few issuers to trade with any regularity or liquidity. “Trading quite stable, as well.”

Later in the session, low-beta spreads for sovereigns from Latin America moved tighter, another trader said.

Brazil’s five-year credit default swaps spreads closed at 372 bps from 380 bps after trading as wide as 382 bps in the morning. Mexico’s credit default swaps finished Thursday at 147 bps from 154 bps.

Meanwhile, Brazil-based Braskem SA was much weaker after the announcement of a naphtha-supply contract with Petrobras, another trader said.

In other trading, bonds from Ukraine have performed strongly so far this week, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Quasi-sovereigns slowly caught up as well,” he said.

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