Emerging market debt trading volumes fall in third quarter

Emerging market debt trading volumes fall in third quarter

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Emerging market debt trading volumes fell in the third quarter of 2020 both on a year-on-year basis and on a sequential basis, the latest data from EMTA, the trade association for the Emerging Markets trading and investment industry disclosed in its latest survey on Monday.

The volume of debt changing hands in the July, August and September period reached $1.13 trillion, down 20% from the $1.416 trillion traded during the same period in 2019. Volumes also fell 14% from the second quarter of 2020, the survey said.

Local market debt volume of $672 billion was down 16% from the same period a year ago, and off 13% from the second quarter. Nearly two-thirds of all debt trading, 59% of overall volume, was done in local currency debt during the third quarter.

The most frequently traded local currency debt was made of instruments from Mexico, at $117 billion, followed closely by Brazil at $115 billion, India at $74 billion, China at $71 billion and South Africa at $35 billion.

Eurobond trading volume of $454 billion was a 26% decrease from the year-earlier period, and off 15% from the second quarter of this year.

Sovereign-related trading made up 60% of Eurobond activity at $272 billion, down from the 67% share of the volume in the previous quarter.

Corporate Eurobond trading volume made up 38%, or $173 billion of overall Eurobond trading, up from a 32% share in the prior quarter.

"The most frequently traded Eurobonds in the third quarter, according to Survey participants, were Brazil’s 2030 bond, at US$4.4 billion in turnover. Other frequently traded bonds include Argentina’s USD-denominated Par bond (at US$3.6 billion), Mexico’s 2051 bond (US$2.4 billion), Romania’s 2051 bond (US$2.3 billion) and Pemex’s 2050 bond (at US$2.2 billion in turnover and the most frequently-traded corporate debt instrument)," the survey said.

While Mexican instruments were the most frequently traded, making up 14% of overall volume, the amount of turnover plunged 48% in the third quarter compared to last year at that time, with $156 billion changing hands. Mexico saw a 32% drop-off from the second quarter of this year.

Survey participants said Brazil had $147 billion in turnover in the latest reporting period, a 32% drop in the year-on-year period and a 23% drop from the second quarter. Brazil was second, only just, in overall volumes traded at 13 percent, EMTA's statement said.

In contrast, Chinese assets had trading volume of $116 billion, up 35% year-on-year and up 23% from the second quarter. Chinese-related assets made up 10% of the overall volumes in the quarter.

China was followed by India with $82 billion in trades and Colombia at $51 billion.

"EMTA’s Survey includes trading volumes in debt instruments from over 90 Emerging Market countries, as reported by 39 leading investment and commercial banks, asset management firms and hedge funds."