Emerging markets end week quietly; Ecuador's bonds continue to climb; Russia calls Ukraine debt

By Aaron Hochman-Zimmerman

New York, Nov. 21 - Emerging markets calmly ended a hectic week by trading mildly tighter.

Ecuador led in trading as its near-default bonds continued to gain momentum from bottom-fishers.

Ecuador's bond issues due 2012 and 2015 were both able to add 2 points on Friday.

Meanwhile, Friday also marked the end of a strong week for U.S. high-grade issuance, a syndicate official said.

Still, emerging markets are far behind.

If any issuer comes, it would have to be a "blue chip" company or sovereign that is "ready to pay," he said, but "I don't see them coming to the market anytime soon."

Even in the short-term trading is expected to slumber into the Thanksgiving holiday in the United States.

"It's going to be a relaxed week," the official said, noting that Wednesday is traditionally a major travel day.

From the major markets, on the back of a stunning turnaround for U.S. equities volatility sank 8.19 to finish at 72.67, according to the VIX index. The index is a commonly used gauge of market volatility.

Russia calls oil tab

In Russia, president Dmitry Medvedev ordered Alexei Miller, chief executive of national oil firm OAO Gazprom, to collect the $2.4 billion debt owed by Ukraine.

"Our Ukrainian partners owe us more than $2.4 billion," Medvedev said, according to reports.

"That's a lot of money for any state and for any company, including Gazprom," Medvedev, the former chief of Gazprom, said.

In response, Ukrainian president Viktor Yushchenko told his government it has five days to produce the money to cover the debt.

Yushchenko also blamed prime minister Yulia Timoshenko's government for its "unprofessional energy policy."

"The incumbent government began its history with not effecting any payments in the first quarter for the gas supplied to Ukraine," Yushchenko said.

In 2006, a similar situation led to a halt of gas shipments to Ukraine.

Latvia joins line for loans

Latvia joined the ranks of Hungary, Iceland and Ukraine as Europe continues to press the International Monetary Fund for a piece of the $200 billion it has set aside for these types of bailouts.

Turkey, which for a time had shunned the IMF, is now also in talks for a possible $20 billion to $40 billion loan.

Also in Turkey, president Abdullah Gul signed a bill that reduces taxes on foreign investment to 2%.

Funds invested from local sources will only be taxed 5%, according to the Hurriyet Daily News.

The law also gives the government the authority to determine the amount of bank deposits to be guaranteed rather than an official banking body.

Currently the Turkish Savings Deposit Insurance Fund guarantees 50,000 lira or $32,400.

The Turkish government bonds due 2030 jumped 4.5 points to 126 bid.

LatAm ends week up, calm

Latin America cooled off on Friday as prices moved slightly to the upside.

Ecuador continued to recover as a market source saw a lot of buying from Barclays.

Both of the distressed-level issues were better by 2 points.

The 12% Ecuadorian bonds due 2012 were seen at 26.5 bid, while the 9 3/8% bonds due 2015 were quoted at 25 bid.

In Argentina, the Senate passed the bill to nationalize the nation's remaining private pension plans, putting $23 billion in government coffers.

Peronist Party senator Miguel Pichetto said the bill will "bring stability to financial markets and the investments pension funds have in local companies," according to the BBC.

"That was expected," a syndicate official said.

The 8.28% Argentine discount bonds due 2033 tacked on 0.75 point to 25.75 bid.

In Venezuela, the 9¼% bonds due 2027 slipped 0.85 point to 64.5 bid, after a buyback of $800 million, which included the 9¼% bonds.

Also, Brazil's highly traded 11% sovereign bonds due 2040 were up just 0.45 point to 112 bid.

Pampa Calichera to retool debt

Chile's Sociedad de Inversiones Pampa Calichera SA announced on Thursday that it will solicit consents to amend its 7¾% senior secured notes due 2022.

The amendments allow for a $48 million dividend payment.

The company will also make attempts to pay down its existing debt of $494 million by $170 million.

The first $100 million will be raised before May 31, 2009 through the sale of assets.

The $70 million portion will be raised by a different method in the second half of 2009.

A consent fee of $22.5 million will be charged to the company.

The solicitation expires at 5 p.m. on Dec. 4.

Pampa Calichera is a Santiago, Chile-based investment firm.

"That's the big news of the week," a syndicate official said.

"They want to increase their capability to raise debt," he said.

Also, the consent fee of $22.5 million "is juicy as hell," he added.

Asia 'better today'

"It's been pretty wild" this week, a trader said, although "it's better today," he said after the close in New York.

Friday saw U.S. equities rally to the close, but even during Thursday's equity disaster, "CDS spreads were well off the wides of late October," he said.

"In the case of the Philippines, it was 605 [bps bid] and it had traded at 850 [bps bid] in October," he said.

"Indonesia never traded through 1,000 [bps bid], but it was as wide as 1,350 [bps bid] in October," he said.

"The hedging dynamic isn't quite what it was," he added.

Still, in the broader sense "the market is still pretty dysfunctional," he said.

"There is very little going on in corporates, very little buying going on," he said "the market is still in poor condition."

The Indonesian bonds due 2018 were seen at 63 bid, 66 offered.

Also, Pakistan's bonds due 2017 dropped to 33 bid, 38 offered.

Philippines holds interest rates

Also in the Philippines, interest rates remained at 6% and 8% for the overnight borrowing and overnight lending rates, respectively.

The monetary board of the central bank "noted that, while price pressures are retreating and inflation expectations are moderating, the rising readings on core inflation suggest that there are still price pressures in the pipeline," according to a statement.

The bank said it will continue to monitor the market and will consider future rate actions.

The peso was seen trading at 49.588 to the dollar.

The Philippine sovereign bonds due 2030 were quoted at 96 bid, 99 offered.

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