Emerging markets mixed; Argentina benchmark bonds up on debt restructuring talk; dollar walloped

By Aaron Hochman-Zimmerman

New York, Sept. 22 - Emerging market prices were scattered by the volatility the market continued to battle on Monday.

The mixed results were once again almost entirely based on externals; however, investors were anxious to hear more about Argentina's debt restructuring plan.

Argentina's bonds jumped on rumors of a possible restructuring plan. The whispers pushed its benchmark discount bonds due 2033 up 3.25 points.

Still, most investors were solidly preoccupied with the up to $1 trillion bailout program from the United States.

"People are just afraid," a syndicate official said. "The numbers are just so big."

"People are afraid of a recession, and it's affecting everything," he said.

Meanwhile on the corporate side, market watchers continued to evaluate upcoming maturities.

More than $80 billion in credit will mature between the fourth quarter of 2008 and the end of 2009, a strategist wrote in a research report.

The number is daunting considering only $6 billion has been printed per month this year.

However, 70% of what is coming due is investment grade, which has enjoyed a much higher deal completion rate than high yield, he wrote.

Still, for a high-grade issuer, such as Lehman Brothers, investor confidence (or the lack of it) can be deadly, even to a preeminent force in the market.

The sovereigns are in less of a precarious position, he wrote.

Only $4.4 billion comes due in the fourth quarter, with more than half from high-grade names.

China will have to repay or refinance $1.6 billion, while Mexico will have to repay or refinance $1 billion.

Volatility spiked in the afternoon to end higher by 1.78 at 33.85, according to the VIX index. The index is a frequently used gauge of market volatility.

The huge bailout plan had to devalue the dollar, a syndicate official said, adding that a flight to safety pumped up many of the commodities the emerging markets buy and sell.

Argentina up on possible restructuring

Latin America kept volumes heavier than usual as many expected a debt restructuring from Argentina.

President Cristina Kirchner was in New York to meet with the United Nations' general assembly on Monday, where some speculated that she may make an announcement about a plan to handle the country's debt.

"More than 50% of investors are asking for this," a syndicate official said about the restructuring, but was unsure of the details of the possible $20 billion plan.

The announcement should come during her lunch at the Waldorf-Astoria Hotel on Thursday, he said.

The 8.28% Argentine discount bonds due 2033 added 3.25 points to 68.25 bid, 68.75 offered.

Peru "was the big mover of the day," he said.

The 8¾% Peruvian bonds due 2033 were lower by 4 points to 120 bid.

In Brazil, the 7 1/8% bonds due 2037 were seen at 107 bid, 107.65 offered, while the 11% bonds due 2040 slipped 0.25 point to 127 bid, 127.25 offered.

High-beta Ecuador's 8% bonds due 2030 were spotted at 75 bid, while investment-grade Mexico's bonds due 2017 were up 0.25 point to 99 bid, 99.65 offered.

Russians sail to Venezuela

A squadron of the Russian navy was underway and headed to Venezuela on Monday.

The ships led by the cruiser Peter the Great will take part in joint exercises with the Venezuelan military.

The scale of the exercises has not been seen since the Cold War and is thought of by many as a thumb in the eye of the United States.

Despite crude prices soaring as high as $130 per barrel, the 9¼% Venezuelan sovereign bonds due 2027 dropped 3 points to 82.25 bid, 82.75 offered.

Emerging Europe mixed

Emerging Europe traded with moderate volumes on Monday as investors were ready to take cover in case of the next major emergency in the finance world.

In Russia, prime minister Vladimir Putin asked the central bank to insure greater amounts of bank deposits, according to the Itar-Tass News Agency.

Putin also offered banks with high credit ratings access to 600 billion rubles from the government's treasury in order to ensure the liquidity of the market.

Only 330 billion rubles were claimed of the 600 billion rubles offered, which Putin touted as a sign that demand for loans did not exceed what was offered.

Elsewhere in Russia, the government announced that it will not consult with the West or with the government of Georgia before it decides where and how many troops to deploy to South Ossetia and Abkhazia.

"As you know, we recognized South Ossetia's and Abkhazia's independence in the same way as many European countries recognized Kosovo's independence," he said on Russian television.

The Russian government bonds due 2030 slipped 0.5 point to 104 bid, 104.5 offered.

In Turkey, smaller investors are feeling the effects of the fall of Lehman Brothers, the Turkish Daily News Reported.

Government agencies and Citigroup, as an intermediary, are looking into the situation to determine how much investors may be owed by bankrupt Lehman, the report said.

The Turkish sovereigns due 2030 added 0.75 point to 147.5 bid, 147.75 offered.

Asia tighter on bailout

Spreads in Asia tightened as discussion whipped around from Washington, D.C., to Wall Street over how to implement the up to $1 trillion bailout for the market.

Meanwhile in the Philippines' local market, the treasury department will auction PHP 7 billion of seven-year treasury bonds on Tuesday.

The 7 1/8% bonds, originally issued on Nov. 2, 2006, will mature on Nov. 2, 2013.

Also, the government announced that it borrowed PHP 34.2 billion in August, or 53% less than August 2007, the Manila Times reported.

The drop off was a result of a weakening of the peso against the dollar, the report said.

The bulk of the loans came in the form of Treasury bonds and bills, which accounted for PHP 25.4 billion and PHP 5.87 billion, respectively.

The peso was seen trading at 46.339 to the dollar.

In Pakistan over the weekend, a bomb targeting the country's leaders exploded killing about 53 people, reports said; however, a change of plans saved the country's leadership.

A government crippling attack may have been averted by the last minute change to the dinner plans of president Asif Zardari, prime minister Yousuf Raza Gilani and the military service chiefs, the reports said.

Also, reports noted that Pakistani border patrolmen fired on, but did not hit, American military helicopters attempting to cross the border with Afghanistan.

The helicopters reportedly returned across the Afghan border without returning fire.

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