Emerging market debt rides higher; Colombia to launch Samurai bonds

By Reshmi Basu and Paul A. Harris

New York, Dec. 21 - Emerging market debt continued to ride higher Wednesday, as the Brazilian bond due 2040 crossed the 128 level.

Meanwhile, the primary market saw a few developments on the sovereign side. First off, the Republic of Colombia plans to make a private placement of ¥22.5 billion of Samurai bonds, according to information published on the web site of Japan Bank for International Cooperation (JBIC).

Mizuho Corporate Bank will be the arranger. JBIC will provide a guarantee on the principal and a part of the interest.

Also, there are rumors that the Dominican Republic has short-listed eight banks for a $300 million bond offering.

Proceeds from the debt sale will be used to finance the repurchase of debt owed to Spanish power company Union Fenosa by a state-owned electricity distributor.

The issue is likely to take place in January.

Over to the Republic of Hungary, the country plans to issue €1 billion of 10½ year eurobond issue via HSBC Bank, Societe Generale and UBS Investment Bank in the first half of January.

On the corporate side, Brazil's Cosan SA plans to sell $250 million of perpetual bonds in the first quarter of 2006.

Brazil 2040 pierces 128

Emerging market debt nudged higher in thin-trading Wednesday.

A trader described the session as "very, very, very quiet". He added that many market participants have already closed their books for the year and taken off for the holidays.

"The transit strike [in New York City] has added to the sluggish tone in the market," he said,

Nonetheless, the market is still popping higher. The Brazilian bond due 2040 added 1.10 to 128.05 bid, 128.25 offered.

In other news, the local press has reported that Ecuador's president Alfredo Palacio has decided to replace finance minister Magdalena Barreiro, who opposed a 15% transfer of oil revenues to the states, according to a sellside source. Whoever is named as Barreiro's replacement will obviously face pressure to increase domestic spending. Ecuador appears to be in good shape, but since it is unable to devalue its currency it needs to maintain a tight fiscal policy, especially if there is a significant fall in oil prices, noted the source.

At session's end, the Ecuadorian bond due 2015 was up 0.70 to 93¼ bid, 94½ offered while the bond due 2030 was unchanged at 91 3/8 bid, 91 7/8 offered. The bond due 2012 was also unchanged at 101¼ bid, 102¼ offered.

Elsewhere, Ukraine's parliament approved the 2006 budget following three earlier unsuccessful attempts, resisting considerable pressure to increase the size of the government's budget deficit, according to another sellside source.

During the session, the Ukrainian bond due 2007 was unchanged at 104 7/8 bid, 105 1/8 offered while the bond due 2013 lost one point to 107½ bid, 108 offered.

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