Emerging market debt trading volume up to $5.571 trln in 2013 -EMTA

NEW YORK, March 27 Thu Mar 27, 2014 6:05pm EDT

NEW YORK, March 27 (Reuters) - Trading volumes of emerging market debt edged just slightly higher in 2013 versus the prior year, reflecting investor concerns over changing monetary policies and global economic growth prospects, a new survey showed on Thursday.

The volume of emerging market debt rose to $5.571 trillion last year, an increase of just 0.22 percent versus the $5.559 trillion that changed hands in 2012, according to EMTA, the trade association for the emerging markets debt trading industry.

Trading volumes did rise 4 percent in the fourth quarter of last year to $1.320 trillion compared to $1.269 trillion in the same period of 2012.

"2013 was a year of pessimism for EM (emerging markets), characterized by investor outflows from the asset class prompted by the US FOMC's warning of 'tapering' in May, as well as rising US Treasury yields and concerns over EM growth," Joyce Chang, global head of fixed income research at JPMorgan, said in EMTA's statement.

In the third quarter of last year volumes fell 20 percent as origination of corporate bonds dried up. It was also the period where emerging market assets felt the broader impact of the first hints of tapering of asset purchases by the Fed.

Local currency market debt trading volumes slipped as well, down 2 percent to $3.654 trillion in 2013 versus $3.726 trillion in 2012, EMTA said.

Turnover of local market instruments made up 66 percent of overall emerging market trading volumes for the full year ended Dec. 31, 2013. In the fourth quarter there was a slight rebound in activity, with a rise of 5 percent in trading volumes to $857 billion compared to the same period in the prior year.

The most actively traded local market debt instruments were from Brazil with $705 billion in turnover, followed by $594 billion in Mexico, $321 billion in India, $264 billion in Russia and $255 billion in Turkey.

While local market trading volumes fell, Eurobond trading increased by 5 percent for the year to $1.890 trillion. It was a similar increase in the fourth quarter with a rise of 5 percent to $458 billion for instruments traded in hard currencies including U.S. dollars, euros or yen.

"Despite the slowdown in inflows to EM debt, the increased Eurobond trading volumes in 2013 reflect record EM corporate and sovereign bond issuance, which combined reached a record $437 billion," said Chang. She added: "Since the beginning of the year, EM corporates and sovereigns have issued $144 billion and we expect EM corporate bond issuance to remain strong this year at $295 billion."

Sovereign debt made up 57 percent of Eurobond transactions, and 19 percent of the survey's overall volume. Trading of sovereign Eurobonds rose to $1.073 trillion in 2013 versus $996 billion in 2012.

Corporate Eurobond trading held steady around $779 billion.

Russia's 2030 Global bond was the most actively traded individual emerging market Eurobond, with $59 billion in annual turnover. It was followed by Brazil's 2023 Global bond with $15 billion in transactions. Russia's 2042 Global bond, Brazil's 2041 Global bond and Mexico's 2044 Global bond all had around $13 billion each in turnover last year.

The top three nations in terms of trading across Eurobond and local debt markets all saw decreases in activity last year.

Brazil was first, with $902 billion traded, representing a 4 percent year-on-year decline. Mexico was second with $748 billion, a 7 percent drop. Russia was third, with a decrease of 3 percent to $499 billion.

EMTA gets trading volumes for over 90 emerging market countries as reported by 50 leading investment and commercial banks, asset management firms and hedge funds to compile its survey. (Reporting By Daniel Bases; Editing by Bernard Orr)

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