Fixed Income Comment: New issuance continues to hit the market

Yesterday proved to be another day where emerging market bond moves were
dictated by US Treasuries. With the US 10-year note briefly breaking the
psyscological 4% yield, EM bonds rallied during London trading with the
benchmark RU30 briefly trading at 98. However, after the release of the FOMC
August minutes, which showed that “significant cumulative policy tightening” would
likely be needed to get the economy to the point of sustainable growth without
inflation, and also highlighting that a lull in economic growth will be “short-lived”,
US Treasuries and EM bonds reversed direction. RU30 hit a low in NY of 97.5, and
with early morning selling today it has continued the downward trend to 973/16.
Corporate and bank bonds activity was relatively quiet, with the Gazprom bonds
outperforming after comments suggesting that further new issuance is unlikely this
year. However new issuance continues to hit the market with Alfa bank
successfully completing an 18-month US$175 million 8.375% yield deal and with
large demand for the City of Moscow new issue allowing the yield to likely be cut to
6.45%, this trend looks set to continue.