September 19, 2017 / 3:11 PM / a year ago

Emerging market debt trading falls in Q2 for first time since 2015 -EMTA

NEW YORK, Sept 19 (Reuters) - Trading volume for emerging market debt fell in the second quarter of 2017 to $1.132 trillion, a survey released on Tuesday showed, a 14 percent decrease from the first quarter and 17 percent lower than in the April-June period in 2016.

It also was the first quarterly decrease in debt trading since the fourth quarter of 2015 and the first annual decrease since the second quarter of that year, the survey results from EMTA, the emerging markets debt trading and investment industry trade association, showed.

“While the decline in 2Q volume was sharp, overall volumes are still within the ranges of recent quarters,” Eric Fine, managing director and portfolio manager at asset manager Van Eck, said in a statement released by EMTA.

Fine speculated that inflows into passive exchange traded fund (ETF) strategies might be affecting trading. “Whether 2Q is wholly explained by that, I’m not sure, but it is reasonable to see declining volumes as passive funds receive inflows at the expense of active funds.”

Brazilian debt instruments were again the most traded, continuing a long-running theme, followed by those of Mexico and China, respectively.

EMTA’s survey includes trading volumes in debt instruments from over 90 emerging market countries, as reported by 45 leading investment and commercial banks, asset management firms and hedge funds.

The group recently reported that participants in a similar survey for the credit default swap markets had reported $261 billion in emerging markets CDS volume in the second quarter of 2017, down 9 percent from the second quarter of 2016, and 35 percent below the first quarter’s $404 billion.

The trade group said earlier this year that debt trading volume rose 9 percent to $5.167 trillion in 2016. (Reporting by Dion Rabouin; Editing by Paul Simao)

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