Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (43376)	10/13/2005 7:37:14 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

Emerging market bonds fall sharply By Joanna Chung Wed Oct 12, 4:05 PM ET Emerging market bond prices fell sharply on Wednesdsay after investors showed signs of risk aversion. Some of the most heavily traded bonds, including those of Argentina, Brazil and Russia, suffered a sell-off, helping to widen the risk spread of the JPMorgan emerging market bond index by an unusual 9 basis points - leaving it at 271bp over US Treasuries. This has left the index 31bp wider than it was at the beginning of last week and reverses a strong gain through September. The sell-off is partly due to profit-taking following an emerging market rally that lasted several months. But it also reflects increasing fears that further interest rate rises in the US could take the sheen off riskier assets that have become an attractive target for investors seeking to boost yields. "We have seen something of a kick-up in risk aversion," said Philip Poole, head of emerging markets research at HSBC. "The general impression is that the US Fed will continue to hike, and the market is pricing that view in. That has led to a widening in US Treasuries, which has also helped push emerging market spreads wider." Will Oswald, global head of EM quantitative strategy at JPMorgan, said that some investors were reducing more illiquid and riskier positions. However, he pointed out that the index was still about 15-20bp tighter than at the beginning of last month, indicating the move was more of a correction than a switch in investor sentiment towards bearishness. A host of emerging market countries were also dealt a blow in a report published yesterday by Standard & Poor's, the credit rating agency, which warned about the potential impact high oil prices could have on the creditworthiness on oil-importing emerging market countries. Oil prices at current levels are already posing a potential danger to the credit ratings or outlooks of Pakistan, Turkey and Lebanon. High prices are hurting their current account positions and putting pressure on their balance of payments, making them more vulnerable to external shocks. A further sharp rise in oil prices could put pressure on the fiscal and external accounts of nine other emerging market governments: the Dominican Republic, El Salvador, Indonesia, Morocco, Panama, the Philippines, Serbia, Ukraine and Uruguay. "Countries such as Turkey and Lebanon that have large current account deficits are already vulnerable to shifts in market sentiment," said Konrad Reuss, managing director of sovereign ratings at S&P. "With a further sharp increase in oil prices, this vulnerability could increase and ratings could come under pressure."