US payrolls, fund outflows exacerbate LatAm fears
Weaker-than-expected employment figures and sustained fund outflows add to existing worries for LatAm bond investors
Sluggish job growth in the US on Friday could fuel pessimism
on LatAm bond markets, as equity fund flows took another blow
and concerns about global economic growth remained strong.
The US on Friday released data showing that 113,000 jobs
were created in the country in January, a figure well below
expectations and one that could indicate that the country's
economy is not growing as fast as expected.
Investors are highly data-sensitive after a volatile start
of the year for the market, said sources. But they added that
the news on its own would impact bond sales little.
Indeed, CDS levels were resilient. Colombian CDS stayed
flat, while that referencing Brazil and Mexico tightened by two
basis points. CDS on Argentina and Venezuela widened,
"In general it's a little bit tough out there," said an
analyst. "I don't think people are happy with that number, but
I think that in the LatAm bond market there are number of other
issues within various pockets that make things difficult to
begin with. Obviously, what's going on with Venezuela, what's
going on with Argentina, what economic indicators you have out
The payroll data came as heavy emerging market fund outflows
continued in the week to February 5, with investors taking
$6.36bn from equity funds and $1.95bn from bond funds,
according to Barclays.
The investment bank said global growth concerns, rather than
tighter US monetary policy, had driven
this year's EM sell-off.
"So far, we haven't seen any signs of a turnaround, so that
continues to send a negative signal," said Benoît Anne,
head of EM strategy at Société
Short-term dynamics remained the same, but there were
reasons to be optimistic, he said. "We've seen a significant
decline in volatility, in currencies for instance," he told
Banking sources also said that despite the lack of LatAm
bond deals in the pipeline, there are signs that investor
confidence in Latin America is still solid, especially if
companies or countries are keen to add a premium to sweeten the
deal and if their books show that their fundamentals are
"Data releases in the LatAm region for the end of 2013 will
set the tone for the intensity of economic activity in 2014,"
Barclays said in a report on Friday. LF