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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (7300)	8/31/1998 1:22:00 PM
From: Steve Fancy	Respond to of 22640

Latam bond spreads show investors distinguish risk Reuters, Monday, August 31, 1998 at 11:22 By Axel Bugge BUENOS AIRES, Aug 31 (Reuters) - Latin American governments complaining that their markets are being hit indiscriminately by contagion from emerging market turmoil can take comfort in bond markets that show clear distinctions of country risk. Bond yields and spreads over U.S. Treasuries have soared across Latin America on the fallout from Russia's economic crisis, but the large variations suggest investors see the creditworthiness of countries very differently. As bond prices move inversely to yields, the latest rout in markets has meant investors are demanding higher returns on Latin American bonds to compensate for what they perceive as higher risks incurred by investing in emerging markets. Of the largest economies, Venezuela has come out as the biggest loser, suffering from recurring talk of a devaluation and the fear that Hugo Chavez, a former military coup leader who wants Venezuela to stop paying foreign debt, might win December's presidential election. Brazil's bonds have been the second hardest hit. Mexico and Argentina have seen their yields and spreads rise much less, creating two tiers in Latin America with those Mexico and Argentina on one side and Venezuela and Brazil on the other. "There are some countries where country risk has risen much more than others," said Marcelo Romano, an economist at the Lopez Leon brokerage in Buenos Aires. Measured by the countries' respective 30-year global bonds, Venezuela's yields have more than doubled to 22.21 percent on Monday from about 11 percent at the end of May. Venezuela must now pay 16.91 percentage points more than the United States does on similar treasury bonds to attract investors. That spread is 11.30 percentage points wider than in May. "Venezuela has been hurt more, stumbling on the recurrent rumors of a devaluation," said Hugo Diaz Lourenco, an analyst at Argentina's C&E consultancy. Brazil's yield has climbed to 17.35 percent now from 11.22 percent at the end of May and its spread has risen 6.3 percentage points to 11.99 points. Mexico's yield has risen to 13.03 percent from about 9.8 percent at the end of May, while its spread has risen by 3.3 percentage points to 7.61 points. Argentina's 30-year yield has risen to 13.74 percent from 10.5 percent and seen its spread increase 3.33 percentage points to 8.33 points. "There is clearly some differentiation, shown for instance by the fact that some countries like Argentina have much more healthy fundamentals," said an analyst at a foreign bank in Buenos Aires, who asked not to be named. While analysts say these different levels of spread increases are a gauge of risk factors like countries' ability to pay off debt, currency and political stability, they also point out that a lot of the sell-off is due to funds covering losses elsewhere, like in Russia. That kind of selling often does not take into account countries' economic fundamentals. And, analysts warn that if financial losses pile up elsewhere around the globe, and if funds are forced to make more sales, the fundamental differences will become less important. That process is exacerbated as the larger the global financial market losses, the more volatility there is in markets and less important are relative economic fundamentals. "The longer the crisis lasts, the less differentiation there will be be," said Diaz Lourenco. That could mean that those countries in Latin America that have fared relatively well could still fall disproportionately more. "There are now differences but when the differences become too large, the others could fall," said a fund manager, who asked not to be named. buenosaires.newsroom@reuters.com)) Copyright 1998, Reuters News Service

To: djane who wrote (7300)	8/31/1998 1:23:00 PM
From: Steve Fancy	Read Replies (3) \| Respond to of 22640

Back from a somewhat sleepless vacation...Bummer week. Thanks to all the contributors for maintaining the news flow here. I've been reading since late last night and finally caught up. I feel like I didn't miss a beat. My gut feeling is that the selling is not done. I think we may see 7400-7600 on the DOW yet this week. TBR seems to be attempting to hold the 70 level, but if the DOW were to crack I think it may see 65 yet. Holding off for the moment...I'll catch 'er on the way up. sf