EM CEEMEA CREDIT: MNI EM Credit Market Wrap - CEEMEA
MNI EM Credit Market Wrap - CEEMEA
Measure Level Δ DoD
5yr UST 4.55% +9.8bp
10yr UST 4.75% +6.0bp
5s-10s UST 19.31 -3.8bp
CDX EM 97.0 -0.2bp
CDX EM IG 100.7 -0.1bp
CDX EM HY 93.0 -0.2bp
WTI Crude 75.7 +1.7
Gold 2689 +21.6
USDZAR 19.15 +0.22
USDTRY 35.41 +0.08
EURHUF 413.4 -0.29
EURPLN 4.27 +0.01
EURCZK 25.09 +0.00
** The main stories out of the region **
Global liquid EM sovereign bonds both high grade and high yield were generally down .75 to 1 point post the US labor report surprise. Names like SOAF and KSA in the long end were down more than a point and .75 point in the belly while TURKEY, REPHUN and ARGENT were better behaved down .25 - .75 points. In Latam, recently issued Codelco 10yr bonds were .30 lower than new issue pricing while new Mex 10s/30s were down .65 and .90 respectively and new Chile 12 yr fell .60 from issuance with almost all of those losses from new issue coming from today’s sell off. The new YPF 9 yr traded lower but unchanged from issuance, giving up gains from two days ago. The headline payroll number of +256k vs 160k expected and 4.1% vs 4.2% from the household survey triggered an immediate selloff in 10 year Treasuries of ¾ point and a point in the long end with liquid EM adjusting quickly while off the run high yield corporate bonds re-priced slower. Treasuries recovered somewhat, only down ½ point 10y and longer, but EM bonds have generally not bounced back.
CEE
MVM bid efforts for Romanian's EON Energie are reportedly being blocked. Further uncertainty to be expected. Mixed performance for bonds with '28s wider @ z+182bp and '31s marginally tighter @ z+223bp
CIS
Azeri Socar is expected to issue green bonds denominated in USD on local markets. The use of proceeds is marked for clean energy projects. Meanwhile, Socar Turkiye is reported to be selling its gas distribution units to Aksa.
GCC
Abu Dhabi Ports Co's ratings got affirmed by Fitch @ AA- with stable outlook.
Africa
Transnet Rail Infrastructure Manager has set an application deadline of February 7 for initial slots for private operators.
Top/Bottom Performers recap:
Among top performers on the day, several bonds from the Gulf region charting 12-15bp tighter, including FABUH 28s, DUGB 29s, SHARKSK '28s. EGYPT sovereign charting 16-22bp wider.
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US TSYS/SUPPLY: Preview 10Y Note Auction: Re-Cheapening, Re-Steepening
Treasury will auction $39B in 10Y Note (reopen, CUSIP: 91282CLW9) at 1300ET Wednesday.
- 10Y yields have pulled back significantly since the last auction, with the current when-issued of 4.243% comparing to the November refunding's 4.347% high yield hit on Election Day. Today's highly-anticipated CPI report initially pared the available concession, with WI yields dipping below 4.20% as December Fed cut pricing was bolstered by the major inflation categories coming largely in-line with expectations.
- However that move has faded in the hours since the release, with long-end yields bouncing back from intraday lows as we approach the auction.
- Relative value-wise, price action has worked in a concessionary direction for today's auction.
- The curve has steepened: 2s10s are up 2.8bp on the day, at 10.7 having flirted with re-inversion in late Nov for the first time since early September; 5s10s are 1.5bp higher on the day (13.4bp the steepest in a month), While the curve as a whole has steepened - 10s30s are up 1.3bp to 20.4bp, highest since late Oct - 10s have been steady on the 5s-10s-30s fly (-6.7bp last) since late November, though richer vs levels early last month (closer to -2bp).
- The last several auctions have been mixed, alternating between tails and trade-throughs since July (last trading-through 0.3bp in Nov), with the 5-auction average seeing a 0.2bbp tail (heavily influenced by August's 3bp tail). 5-auction average stats include 2.52x bid-cover (2.58x last), 13.7% primary dealer takedown (14.7% last), with indirects taking 69.8% (61.7% last) and directs 16.5% (23.6%). See table below.
| High yield | When-issued yield | Trade through (tail) | High - Median Spread | Bid-to-cover | Primary Dealer Percent | Indirect Percent | Direct Percent | Offering Amount | |
| 5 Auct. Avg | 4.059% | 4.058% | -0.2 | 5.8 | 2.52 | 13.66% | 69.82% | 16.52% | 40.2 |
| 5-Nov-24 | 4.347% | 4.350% | 0.3 | 5.7 | 2.58 | 14.72% | 61.66% | 23.62% | 42 |
| 9-Oct-24 | 4.066% | 4.061% | -0.5 | 5.8 | 2.48 | 13.93% | 77.63% | 8.44% | 39 |
| 11-Sep-24 | 3.648% | 3.662% | 1.4 | 4.3 | 2.64 | 10.25% | 76.05% | 13.71% | 39 |
| 7-Aug-24 | 3.960% | 3.930% | -3.0 | 7.2 | 2.32 | 17.88% | 66.17% | 15.95% | 42 |
| 10-Jul-24 | 4.276% | 4.285% | 0.9 | 5.8 | 2.58 | 11.53% | 67.61% | 20.86% | 39 |
FED: US TSY 17W AUCTION: NON-COMP BIDS $604 MLN FROM $64.000 BLN TOTAL
- US TSY 17W AUCTION: NON-COMP BIDS $604 MLN FROM $64.000 BLN TOTAL
EU-RUSSIA: U-Turn As 15th Sanctions Package Agreed After Initial Reservations
In what represents an about-turn, the Hungarian presidency of the Council of the European Union has announced that member state ambassadors to the EU have agreed on a 15th package of sanctions to be imposed on Russia by the Union in response to the invasion of Ukraine. Initially, it appeared as though envoys were set to reject the latest sanctions package over disagreements regarding divestiture from Russian oil and oil products.
- However, posting on X the Hungarian presidency said as part of the agreed sanctions, "The package adds more persons and entities to the already existing sanctions list, and targets entities in Russia and in third countries other than Russia that indirectly contribute to Russia’s military and technological enhancement through the circumvention of export restrictions. The adopted sanctions constrain the activity of additional vessels of third states operating to contribute or support actions or policies supporting Russia’s actions against Ukraine."
- Reuters reports that "the package also includes an extension of six months for the Czech Republic to import Russian oil-based products coming mainly through Slovakia", seen as a sticking point in earlier talks. The 15th package is set to be formally approved at a Foreign Affairs Council meeting of foreign ministers on 16 Dec.
- Bloomberg: "As part of the package, the EU proposed adding to the sanctions list several Chinese entities and a Chinese national, who controls a company that has breached EU trade restrictions;"
