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Strategies & Market Trends : Aardvark Adventures -- Ignore unavailable to you. Want to Upgrade?

To: ~digs who wrote (2048)	1/27/2006 2:51:05 PM
From: ~digs	Read Replies (1) \| Respond to of 7944

Emerging debt: Risk appetite grows as stocks rise warrants.bnpparibas.com NEW YORK, Jan 27 (Reuters) - Aversion to risky emerging markets fell to record low levels on Friday as investors focused on buoyant stocks and ignored volatility in the U.S. Treasury market. Yield spreads between emerging bonds and Treasuries, a key gauge of risk perception, tightened 4 basis points to an all-time low of 210 points while total returns rose 0.30 percent, the JP Morgan's Emerging Markets Bond Index Plus (EMBI+) showed. According to the wider EMBI Global , spreads were also 4 basis points narrower at 204 points. Brazil's Global Bond due in 2040 , the most liquid emerging market paper, leaped 0.437 point in price to 130.625 at a yield of 6.620 percent. "Investors keep buying emerging market bonds despite all the volatility in the Treasury market," said Marcio Geronino, an analyst with Lopez Leon brokerage in Sao Paulo. "Trading volumes are OK, even a little higher than average." U.S. Treasury bonds prices first rose in the morning on news that the world's biggest economy grew much less than expected in the fourth quarter. The data raised hopes that the U.S. Federal Reserve could stop raising interest rates earlier than expected, making riskier emerging market assets even more appealing to investors. But a new round of economic data showing stronger-than-expected U.S. home sales in December reversed the scenario, briefly sending yields on the 2-year Treasury notes to its highest level in five years. Emerging countries' bonds, however, are apparently shrugging off any yield increase on U.S. Treasuries and tracking instead the stock market, analysts said. The Dow Jones industrial average gained more than 1 percent on Friday with investors optimistic about corporate profits. Overall returns on Argentina's bonds jumped 0.93 percent while the country's spreads tightened 6 basis points to 433 points on the EMBI+, extending a rally of almost 7 percent in January. Argentina's central bank said on Thursday the New York Federal Judge Thomas Griesa ruled against a freeze on $105 million in reserves the country holds in New York. The freeze was sought by two creditors -- EM Ltd. and NML Capital -- which did not accept the country's sovereign debt restructuring last year. They will likely appeal the decision, Argentina's central bank said, but analysts expect the U.S. Court of Appeals to confirm Griesa's decision. "The timing of the Court of Appeals ruling is difficult to predict," Carola Sandy, an analyst with Credit Suisse, wrote in a research note. "In all cases related to Argentina, the U.S. Court of Appeals has upheld the ruling of the district court and we think this will be again the case."