Lights off for emerging markets trading; prices lower

By Reshmi Basu and Paul A. Harris

New York, Dec. 23 - Emerging market debt ended the session down Thursday on a softer U.S Treasury market.

During the session, prices were lower although trading was pretty much non-existent as investors shut down for the holidays.

"Everybody is gearing up for next year," said a market source.

Also in thin trading, U.S Treasuries were slightly down on a spate of more economic data, which spelled out inflation worries.

Coming above market expectation, U.S durable goods orders were up 1.6% in November, the biggest increase since July.

The Labor Department also reported that first-time claims for state unemployment benefits rebounded after seeing the biggest decline since December 2001 the week before. The number of initial claim increased 17,000 to 333,000 for the week ended Dec. 18.

In mixed news, the Commerce Department reported that consumer spending grew by a less-than-expected 0.2% in November while personal incomes grew 0.3%.

Finally, the University of Michigan's final reading on consumer confidence in December jumped to 97.1 from November's 95.7.

With the economic news, the U.S dollar hit an all time low against the euro, which reached $1.3489.

All of this together pushed the Treasury market lower. The yield on the 10-year Treasury note stood at 4.22% at late trading Thursday, up from Wednesday's 4.20%.

In emerging markets, Brazil and Russia were among the losers for the day. The Brazil C bond lost 0.062 to 102 bid while the bond due 2040 fell a quarter of a point to 118.65 bid. The Mexico bond due 2009 slid 0.15 to 122½ bid. Russia's bond due 2030 fell a quarter of a point to 102¾ bid.

Oil-producers Ecuador and Venezuela also felt the price bite, despite oil hovering above $44 per barrel. The Ecuador bond due 2030 fell 0.55 to 85 bid. The Venezuela bond due 2027 slipped 0.20 to 106.10 bid.

Illiquid issues such as Panama and Peru were quoted flat late in the session. The Panama bond due 2008 was unchanged at 111¼ bid. The Peru bond due 2012 was bid at 117, unchanged.

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