It is a well known adage that an emerging market is one that it is difficult to emerge from in an emergency. But it is also a difficult one to get back into straight once the strife has passed with investors stampeding back in like an alarmed herd.
The lion’s share of the trading in EM takes place in the derivatives and CDS market, not bonds. So the EM bond market is illiquid enough at the best of times with the products squirrelled away for good once bought. Prices may be marked wider or tighter but there’s little actual trading. In markets as volatile and illiquid as in recent weeks, conditions are even tougher to navigate for investors, issuers and dealers.
Nonetheless, people in the market still quibble about new issue premiums. Depending on whether you were on the mandate for Turkey's deal last week or not, you would have placed the premium somewhere between 10bp and 30bp.
How much Turkey left on the table for investors depends on each trader's own view of the fair value of Turkey's outstanding curve. In these volatile and illiquid times, that is no easy number to assess. Far more important is that Turkey showed it had access to the market at a reasonable level when it is a country at the very centre of the recent troubles in EM.
For Slovenia’s $3.5bn deal, the apparent lack of concession indicates that demand was strong, while any numbers touted as an exact number for Slovenia’s new issue premium would likely have been wrong because of the lack of liquidity in the secondary market at the time.
The new issue premium debate is always fun. It is a way for lead managers to justify pricing and brag to their issuers. It is a way for those away from the deal to claim that they could have done better, which happens often.
But in this market, not only does whatever number concocted mean very little, but it is misses the point that in times like these we should be celebrating that the market is open at all.