Emerging debt prices recover, eyes stay on Brazil
Reuters, Friday, September 11, 1998 at 17:04
NEW YORK, Sept 11 (Reuters) - Emerging debt prices
recovered on Friday from the previous session's steep losses as
investors reacted to an interest rate increase in Brazil and
gains in U.S. equity prices, traders and analysts said.
"The cost of betting against Brazil increased when the
discount lending rate was raised to 49-3/4 percent from 29-3/4
percent," said Dan Peirce, head of emerging markets research at
BancBoston Securities Inc.
The Dow Jones Industrial Average ended up 2.36 percent at
7795.50, after Wall Street found no surprises in independent
council Kenneth Starr's report on the White House sex scandal.
Brazil is expected to stay under the market's microscope
next week, as investors ponder the depletion of the country's
reserves, the possibility of a devaluation of the real and any
steps the government might take to decrease its seven percent
fiscal deficit.
"What we're really hoping for next week is no more bad
news," Peirce said, referring to Brazil's severe capital
outflows over the last week.
"A little stability could be very healing," Peirce said.
"There's been a huge extraction of capital from what had been a
bloated market. Now the market is just numb."
Many investors continued shying away from emerging market
risk in the wake of Russia's recent devaluation of the rouble
and the country's default on internal debt.
Russian officials will give a presentation to the Group of
Seven meeting of foreign and finance ministry officials in
London on Monday, an official close to the talks said on
Friday.
"We hope there will some discussion of financial support
from the G-7 for Brazil," said Siobhan Manning, Latin American
analyst at PaineWebber.
"It would be symbolically important if the G-7 came up with
a line of credit to help restore investor confidence in
Brazil."
Benchmark Brazil C bonds <BRAZILC=RR> were up 1-1/2 to bid
53-5/8, Argentina PAR bonds <ARGPAR=RR> were up 1/2 to bid
59-1/4 and Russia PRIN paper <RUSPRIN=RR> was down 1 to bid
7-3/4.
"When there is panic there is no liquidity and lots of
volatility," one emerging debt trader said Friday. "That's what
we've seen all day."
Copyright 1998, Reuters News Service |
