September 5, 2014 / 3:50 PM / 3 years ago

Emerging market debt trading volume up to $1.668 trln in Q2 -EMTA

NEW YORK, Sept 5 (Reuters) - Trading volumes of emerging market debt rose five percent in the second quarter of 2014 versus the same period a year ago, and for the first time ever trading of corporate Eurobonds exceeded that of sovereign Eurobonds, a new survey showed on Friday.

Overall trading volumes of emerging market debt reached $1.668 trillion, up from $1.587 trillion in the second quarter of 2013 and a 5 percent increase over the first three months of this year, according to EMTA, the trade association for the emerging markets debt trading industry.

“It’s not surprising to see higher EM trading volumes in the second quarter, as market participants have become more attuned to risks in EM and are willing to weather volatility-inducing situations such as the ongoing Russia-Ukraine crisis,” Robert Abad, portfolio manager at Western Asset Management Company in Pasadena, California, said in EMTA’s statement.

Abad noted how investors were trading more within the emerging market sector rather than simply pulling cash out, wholesale, demonstrating more resiliency to geopolitical ructions.

Corporate Eurobond trading volumes totaled $323 billion in the second quarter, accounting for 51 percent of total Eurobond activity. Sovereign Eurobond trading volumes were $291 billion in the same period, down from $302 billion in volume from the first quarter of the year.

Russia’s 2030 bond was the most actively traded Eurobond at $20 billion, followed by Argentina’s U.S. dollar-denominated Discount bond at $10 billion, Argentina’s U.S. dollar-denominated Par bond at $6 billion, Brazil’s 2025 bond with $4 billion in turnover and Venezuela’s state-owned oil company PDVSA’s 2026 bond at $3 billion.

Overall, Eurobond trading volumes were up 16 percent in the second quarter to $632 billion versus the same period a year ago. Volumes rose 6 percent from the first quarter of 2014.

EMTA said there was “no trading of the few remaining Brady bonds, instruments that played a crucial role in the EM industry’s birth two decades ago,” only the second time that has happened in the 17-year history of the survey.

Local-currency denominated bond trading volumes slipped less than 1 percent to $1.033 trillion in the second quarter, making up 62 percent of overall emerging market debt trading volumes.

In local-currency debt trading, Mexico was the most active at $217 billion, followed by Brazil at $189 billion, India at $109 billion, Singapore at $61 billion, and South Africa at $57 billion.

Mexico was also the most actively traded when both local and hard currency volumes were combined, with $258 billion in turnover. That is a 32 percent increase over the same period a year ago, but down 6 percent from the first quarter of 2014.

Brazilian debt instruments were second at $248 billion, a 10 percent increase over the year-ago period and 68 percent surge over the first quarter. Russia was third with $126 billion, down 28 percent in the year-ago period and down 7 percent from the first quarter of 2014. (Editing by Paul Simao)

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