Emerging market spreads widen ahead of holiday weekend; Iraq signs $685 million IMF loan

By Reshmi Basu and Paul A. Harris

New York. Dec. 23 - The pre-holiday mood made for a sluggish trading session Friday.

Spreads for emerging market debt widened in an abbreviated session. Markets closed at 2 p.m. ET ahead of the holiday weekend.

In other news, the Republic of Iraq said it has reached a loan agreement with the International Monetary Fund and has also wrapped up a $14 billion debt swap with private creditors

The $685 million stand-by arrangement is a first for the nation. The loan is designed to give support to Iraq's economic program over 15 months.

Thin volumes

With year-end approaching, liquidity has been drying up in recent weeks.

A trader noted that volumes were "extremely thin" during an "extremely slow" trading session Friday.

He added that spreads widened by around four basis points with flat returns.

Meanwhile illiquid issues such as Dominican Republic, El Salvador, Peru and Uruguay were unchanged for the day, he remarked.

However, Brazil popped higher. During the session, its bond due 2040 added 0.35 to 129.05 bid, 129.25 offered.

Continuing its run of gains to successive highs. During Thursday's session, Brazil's 2040 bond added 0.65 to 128.70 bid, 128.90 offered.

Elsewhere, Argentina's par bond due 2038 inched up 0.10 to 32.75 bid, 33.20 offered. The Venezuela bond due 2027 gained 0.10 to 116½ bid, 117¼ offered.

Over to Russia, its bond due 2030 was unchanged to 112.50 bid, 112.687 offered.

The next couple of trading sessions will be quiet, said a market source.

"We're not seeing a heavy economic calendar for the week, so we're not expecting any volatility from the [U.S] Treasury side.

"Emerging markets is done for the year. And what a good year it was."

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