NEW YORK, May 15 (IFR) - LatAm credits were ending the week largely in better shape, as EM bond funds continued to enjoy inflows and US Treasury yields sank following softer-than-expected US economic data.
“The risk tone is good and Treasuries are anchoring the market,” said a New York-based trader. “It is very firm and we are tighter on the week.”
Nevertheless, another volatile week for US rates has left borrowers debating whether to wait or pull the trigger on new bond deals before yields potentially move higher.
“While no one thinks we are going back to 1.80%-1.85% on the 10-year, people feel we will stay in this range for a while, so there is no mad rush to print,” said a syndicate official.
US Treasuries rallied Thursday, with yields on the 10-year shrinking to 2.14% by early afternoon after weak US data left markets believing the Fed might wait longer before hiking rates.
This comes on the back of a relatively active week in the primary markets, where Chile’s BCI, LatAm Airlines and Ecuador raised close to US$2bn equivalent between them.
Secondary performance on newly minted deals was far from stellar, however.
Ecuador’s 10.50% 2020 was being bid at around 107.75 after being tapped Thursday for another US$750m in a reopening that was priced at 107.789 to yield 8.50%.
LatAm Airlines’s new dual-tranche issue of enhanced equipment trust certificates was putting in a mixed performance.
The Class A 2029s (A2/A-) were being quoted about a quarter point higher at 100.00-100.50, but the Class B 2025s were trading lower at 99.125-99.625 after pricing at par on Thursday.
Meanwhile, emerging market bond funds saw continued inflows, although at a slower pace than prior weeks.
Overall EM-dedicated bond funds received US$121.39m in the week ended May 13, marking the smallest weekly inflow of the last six weeks, according to UniCredit, citing EPFR data.
Year-to-date flow for the asset class remains positive, with hard currency and blended funds receiving US$3.44bn over that period versus US$2.28bn of outflows for local currency funds.
“In the US, the weaker data of late should see 10-year yields drift lower and stabilize, provided data remains benign, which should also benefit EM bonds, at least into the early half of June,” UniCredit analysts wrote. (Reporting by Paul Kilby; Editing by Marc Carnegie)