Markets retreat in line with core yields

US stocks closed weaker on Friday following a jobs report which showed a miss in the expected change in NFP data; the 199k increase was shy of the expected 450k. The NASDAQ shed 0.96% while the S&P and the DOW shed 0.41% and 0.01% respectively. Yield on 10Y USTs closed yet higher at 1.7620%.

Hawkish FOMC minutes from the December meeting that led to the rise of the core yields as well as the lack of traders present due to Russian holiday week, were the main drivers across the sovereign yields last week in the CIS region. Well, apart from Kazakhstan, where the domestic instability resulted in the underperformance of Kazakh Eurobonds. Long end RUSSIA closed the week down around 4.5-5 pts in cash price, UKRAIN down 1.5-2pts in the 2029-33s maturities, while KAZAKS 45 was down 6 points in total. The latter however saw some buying in the last couple of days, with the bonds recovering 2-3pts from the January lows. The outperformer was BELRUS, with 2031 maturity trading up around half a point on the week. The high-stake talks between Russia and the U.S. begin this week, as the Biden administration and its allies are discussing possible export controls, including on sensitive technology and electronics, to be imposed if Vladimir Putin seizes more of Ukraine.

South African rand-denominated debt kicked off the week lower ending the bullish run that had seen ZAR debt outperform in a market that was predominantly lower; ZAR debt returned 2.47% in dollar terms while EM peers returned a 0.54% drop. Foreigners picked ZAR1.9 billion last week according to official JSE data while the JSE All Share Index closed a comparatively modest 0.31% higher albeit having pared gains from 1.83% that was recorded midweek.

In the Latam region the core yields theme also dominated the tone on the week with sovereign bonds selling off in line during the week to stabilize on Friday, BRAZIL, MEX, CHILE, PANAMA and URUGUA traded down around 4.5-5.5 pts on average in the long end on the week, with PERU the underperformer, down 7pts on the 30Y. COLOM was the winner of the space, only down around 2pts. PEMEX and PETBRA fared slightly better than their sovereign counterparts, only down 2-3 points on the long end, supported by the stronger oil prices.