Markets search for meaning in mayhem
It’s chaotic out there in secondaries today, as those investors still at their desks flip-flop between bullishness and bearishness in the CEEMEA market.
“The market is broken,” said one bond trader. “People have no idea what they are doing.”
Russia and Kazakhstan have both taken a hammering from Tuesday’s downwards move in oil prices, even though oil has stabilised at US$49.60 today.
With the exception of the Russia 2030s — which trade in a vacuum largely because of domestic names repoing so much of the bond with the central bank earlier this year — Russia’s curve is down a quarter to just over half of a point.
The 2020s are worst hit, shedding 0.575 points from their cash price over the morning session to reach 101.075, according to Thomson Reuters Eikon prices.
Perennial CIS whipping boy Kazakhstan has seen larger drops, with its 2045s down 1.1 points to 97.
“It would be worse if Treasuries were not reacting how they are,” said the bond trader.
China’s second day of devaluing the renminbi has led to a flight to haven assets. Ten-year Treasuries were bid at a yield of 2.093 late Wednesday morning from 2.157 earlier today.
There have been some CEEMEA investors chasing the spread, with Turkey’s long end bid slightly tighter, despite the threat of more elections and violent attacks in the country earlier this week.
The one seemingly calm spot among the storm is Central and Eastern Europe.
Hungary and Poland’s curves are both up by up to quarter of a point, while Croatia’s 2023s have added 0.65 to their cash price to 102.4.
“Everyone is happy to buy thinking that the ECB will keep CEE afloat with bond buying,” said the bond trader, who added that he did not think this was a good idea.
Still, it could be worse. “If we had more people at their desks and fewer accounts shut down over the summer, there would be more pressure now,” said the trader. “But the illiquidity is doing my nut in.”
