Emerging-Market Bonds Rise on Speculation of Emergency Rate Cut
By Lester Pimentel
March 10 (Bloomberg) -- Emerging-market bonds rose following a Goldman Sachs Group Inc. research note suggesting that the Federal Reserve will cut rates before its scheduled meeting to shore up the U.S. economy.
Venezuelan debt paced gains. The yield on the country's benchmark 9.25 percent dollar bonds due in 2027 dropped 7 basis points to 9.61 percent at 9:41 a.m. in New York, according to JPMorgan Chase & Co. A basis point equals 0.01 percentage point. The bond's price climbed 0.6 cent on the dollar, the most since March 4, to 96.85 cents.
``Things are up as Goldman is going around saying there's going to be an emergency Fed rate cut today,'' said Edwin Gutierrez, who manages about $5.5 billion of emerging-market debt for Aberdeen Asset Management Plc in London.
Goldman joined several other analysts who say the Fed may lower interest rates today in ``a more aggressive response'' after the government said on March 7 that employers unexpectedly cut jobs in February for a second month.
Fed funds futures on the Chicago Board of Trade showed an 88 percent chance that the central bank would cut the 3 percent target rate for overnight lending between banks to 2.25 percent by its March 18 meeting.
The extra yield investors demand to own emerging-market bonds over Treasuries narrowed 2 basis points to 2.94 percentage points, according to JPMorgan's EMBI Plus index.
The risk of owning Venezuelan bonds, among the highest yielding in emerging markets, declined today, according to Bloomberg data. Five-year credit default swaps based on the country's debt fell 4 basis points to 621 basis points. That means it costs $621,000 to protect $10 million of the country's debt from default.
Argentine central bank President Martin Redrado said emerging markets are weathering the global financial-market turmoil ``very well.''
``I haven't said that we've decoupled,'' Redrado told reporters at a meeting of central bankers in Basel, Switzerland, today. ``Emerging economies are not an island in the world. Financial conditions have tightened.''
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net |
