Emerging market debt bounces along with U.S Treasuries; Brazil down

By Reshmi Basu and Paul A. Harris

New York, Dec. 22 - Emerging market debt continued to wind down in thin trading Wednesday, as investors shut down their books for this year.

In light volume, emerging markets debt took its cue from the U.S Treasury market.

"Things are really, really slow. Pretty much everything is done for the year," said a trader.

"You could say it was a Treasuries' story today [Wednesday], but really there's been a lull in trading for the past few days," he said.

"Very, very, very quiet."

U.S Treasuries dipped on revised economic data, which hinted at higher levels of inflation. Spending by consumers helped propel the growth of the U.S economy by 4%, coming in higher than expectations, according to the government's final revision of gross domestic product for the third quarter. The previous estimate was 3.9%.

The yield on the 10-year note stood at 4.20% by the end of the session, widening three basis points from Tuesday's 4.17%.

Losers for the day included Brazil, Colombia and Mexico.

The Brazil C bond fell 0.126 to 101.937 bid while the bond due 2040 slipped 0.10 to 118.70 bid. The Colombia bond due 2012 was down ¼ of a point to 113½ bid. The Mexico bond due 2009 lost 0.10 to 122.60 bid.

Winners for the day were Russia and Turkey.

The Russia bond due 2030 added 0.055 to 102.68 bid. Turkey's bond due 2030 gained ½ a point to 145 bid.

Illiquid issues such as Panama and Peru were flat for the day. The Panama bond due 2008 was unchanged at 111¼ bid while its bond due 2020 also saw no movement at 129 7/8 bid. The Peru bond due 2012 remained at 117 bid.

Brazil external debt down

In other news, there was more good economic news out of Brazil. The country cut its debt in November by the largest margin in 2004.

Brazil's net debt, which includes all liabilities excluding foreign reserves and uncollected taxes, slipped 0.5% to $345 billion in November, according to the central bank.

Meanwhile, the central bank reported Tuesday that it had bought $300 million through Dec. 15 since beginning its intervention in the foreign exchange market.

A market source told Prospect News that most of the purchases were made at the tail-end of the period.

Finally, a Russian newspaper reported late Wednesday that state-owned oil company Rosneft has purchased 100% of the shares in the mystery company, Baikal Finance Group.

On Sunday, Baikal made a successful bid for oil firm Yuganskneftegas, putting up $9.4 billion for the subsidiary of embattled Yukos.

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