Emerging mkt debt climbs on better Brazil outlook
Reuters, Monday, September 21, 1998 at 16:58
NEW YORK, Sept 21 (Reuters) - Emerging market debt prices
climbed on Monday on renewed hope that Brazil, Latin America's
bellweather economy, would be able to tide a financial crisis,
at least until after the elections scheduled for Oct 4.
"Some calm has returned to the market...as panic about
something really bad happening in Brazil is gone," said John
Welch, chief economist for Latin America at Banque Paribas.
Higher short-term interest rates in Brazil and an informal
understanding for a stand-by multilateral package from the
International Monetary Fund, the Inter-American Development
Bank (IADB) and the World Bank has boosted Brazil's markets.
Brazil has been fighting against large outflow of capital
that has brought down foreign exchange reserves to around $50
billion from $70 billion this summer.
"The possibility of a reasonable stand-by line of credit
out of Washington - with the IADB, IMF and the World Bank" is
providing support to Brazilian bonds, Welch said.
Moreover, technical factors are providing support for bench
mark securities including the "C" <BRAZILC=RR> and the
shorter-maturity IDU bonds, traders said.
Wall Street dealers are short the securities while
Brazilian institutions such as the Banco de Brazil are long the
bonds. As traders either borrow or buy the bonds to close out
short positions, the dollar-denominated bonds have robounded in
price, traders said.
Brazil "C" bonds were up 1-5/8 to 61-3/8 and Brazil IDUs
were up 1/2 point to 84-7/8.
Meanwhile, an IMF official in Washington said capital flows
into emerging market countries have slowed to a trickle: $2.5
billion in August, down from $17.3 billion in July, said
Charles Adams, IMF deputy chief economist.
Meanwhile, in Russia, Mikhail Zadornov, the acting Finance
Minister, promised foreign investors the same treatment as
domestic creditors in the payment of $40 billion of frozen
government debt.
Russia's benchmark PRIN bonds <RUSPRIN=RR> were marginlly
higher by 1/2 point, but still trading at 7-3/8, a level that
is pricing in the possibility of default, traders said.
Copyright 1998, Reuters News Service |
