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

To: wl9839 who wrote (11490)	1/13/1999 3:26:00 AM
From: Steve Fancy	Respond to of 22640

Warren, anything pertaining to Brazil goes here. In that so many external variables influence the market, that could include just about anything. We've discussed Japan and the yen, Russia and the Dow at great length amongst other topics. Like the BZF fund, I'm afraid I know nothing about Brazilian debt. The bloomberg link I post a couple times a day has a bonds section...may be one of the better sources of information. Anyone else have any input? I would think Cardoso would have to be removed from the picture before Brazil would issue debt moratoriums. You probably saw his comments today...something to the effect of the days of not paying debt are over. I believe him. Hope he drives around in a tank. Appreciate your input also. This thread is starting to pick up again. The more the merrier. I learn a lot from you guys. sf

To: wl9839 who wrote (11490)	1/13/1999 1:01:00 PM
From: Steve Fancy	Respond to of 22640

Corporate Bonds Weaken on Concern Brazil Will Mean Global Instability (Adds Freddie Mac sale in 6th paragraph.) New York, Jan. 13 (Bloomberg) -- U.S. corporate bonds are weakening after Brazil took steps to let its currency fall faster than expected, igniting fears of instability in financial markets around the world. The surge in U.S. Treasuries, where 10-year notes rose 7/8 and yields fell 11 basis points to 4.71 percent, was accompanied by declines of about 2 points for many junk bonds. Investment- grade bonds lagged gains in Treasuries, causing yield spreads between the two to widen 5 to 10 basis points. '' There's obviously a lot of fear and uncertainty in the market,'' said Gary Goodenough, who manages the $71 million New England High-Yield Fund. He said new bond sales are on hold while securities firms and investors assess the market. ''New issues can't be priced in a vacuum.'' Even so, investors say the corporate market will weather this crisis better than it did Russia's debt default and currency devaluation last August because yield spreads between corporates and Treasuries are already wide. They don't expect securities firms to pare their trading and inventories of corporate bonds as much as in the second half of last year, when securities firms were hit with big losses in emerging country securities and other markets. ''I don't think this is August of last year,'' said David Jallits, who helps manage $5.5 billion at Strategic Fixed-Income in Arlington, Virginia. Today's market moves are a ''knee-jerk reaction,'' he said, adding that many investors knew there was a possibility of problems in Brazil. The Brazilian shock didn't stop Freddie Mac from selling $3 billion of five-year reference notes, though it paid a wider spread over Treasuries than was expected a day ago. The ''AAA'' rated company, which is the second largest buyer of U.S. home mortgages, sold 5 percent notes sold at 5.038 percent, or 56 basis points over the benchmark five-year Treasury issue. A 48 basis-point spread was expected earlier. Junk Bonds In the junk market, Level 3 Communications Inc.'s 9.125 percent 10-year notes were quoted at 95, down 3 points, to yield 9.96 percent. The notes, part of a $2 billion sale in April 1998, are among a handful of actively traded junk bonds because of their size. They are rated ''B3'' by Moody's Investors Service and ''B'' by Standard & Poor's Corp. Other junk bonds, or those securities rated below investment- grade, are faring better. The 7.375 percent notes due in 2004 of Allied Waste North America Inc., the No. 3 U.S. trash hauler, were quoted at 101, down 1 point, to yield 7.70 percent. They are rated ''Ba2'' by Moody's and ''BB'' by S&P. Among higher quality names, the spread between Ford Motor Credit Co.'s 5.8 percent global 10-year notes and Treasuries widened to about 113 basis points from the low 100s. The weakness in corporate bonds comes just as investor confidence in the U.S. economy and company earnings was growing, and companies were planning a flurry of bond sales this month. Yield spreads between investment-grade corporates and Treasuries remain near the widest in at least 10 years, though they have narrowed since October, after the Russian debt default and currency devaluation triggered a shift by traders and investors away from risky securities and towards safer government bonds of developed countries. When corporate bonds became harder to sell, prices plummeted, especially for junk bonds which are most vulnerable to a slowdown in economic growth that would hurt corporate profits and credit ratings. Spreads Over Treasuries The average yield spread between investment-grade corporates and Treasuries is about 152 basis points, down from a 10-year high of 178 basis points reached Oct. 15, according to a Merrill Lynch & Co. index. In first half of last year, the spread averaged about 100 basis points. Junk bonds' average yield of 10.47 percent yesterday was 567 basis points greater than 10-year Treasury notes. That spread was as wide as 680 basis points in mid-October after averaging 335 basis points in the first half of last year. -------------------------------------------------------------------------------- © Copyright 1998, Bloomberg L.P. All Rights Reserved. latinvestor.com