Emerging mkt bonds lower as credit concerns rise
Reuters, Thursday, September 24, 1998 at 17:13
NEW YORK, Sept 23 (Reuters) - Emerging-market bonds
declined two to four points Thursday as the near-failure of a
hedge fund escalated credit concerns, traders said.
As is often the case in a general market downturn, Brazil's
bonds, among the most liquid in the sector, were the worst hit,
traders said.
Brazil "C" bonds were lower by nearly two points to 62 near
the end of trading session, traders said.
Market attention was focussed on the bail-out of Long Term
Capital Management, the Greenwich, Conn.-based hedge fund run
by former Salomon Brothers bond trading chief John Meriwether.
As market participants pondered how banks would deal with
reducing the leverage in the hedge fund's investments,
risk-management officials were busy combing through trading
books examining total exposure to hedge funds, traders said.
As risk limits are being reduced on dealings with hedge
funds, the funds in turn are reducing investments in risky
bonds in emerging markets, leading to lower prices.
"There is an over-arching concern about credit," said a
trader at a European bank.
Traders said the default by Russia on its domestic debt has
left a scarr on the markets that will take a long time to heal.
In the meantime, emerging market bond prices are likely to stay
depressed, they said.
Copyright 1998, Reuters News Service |
