Emerging Debt-Brazil edges higher despite Venezuela
www.forbes.com Reuters, 01.13.03, 4:01 PM ET
NEW YORK, Jan 13 (Reuters) - Emerging market sovereign bonds edged higher on Monday as investors looked past the political and economic crisis enveloping Venezuela and focused on Brazil, where the central bank, bolstered by increased investor confidence, staged a successful debt rollover.
Benchmark Brazil C bonds <BRAZILC=RR> rose 1/2 to bid 71-1/8 after the country's central bank sold all $400 million in domestic debt on offer. It has now rolled over 97 percent of $1.8 billion in dollar-linked securities coming due on Jan. 16.
The bank was seen capitalizing on growing investor confidence in the new government of President Luiz Inacio Lula da Silva, who took office on the first of the year.
"The noises out of Brasilia from the new (government) still tend to be very positive, such as raising the primary fiscal surplus," said Suhas Ketkar, senior economist and head of emerging markets analysis at the Royal Bank of Scotland.
The statements from Lula's camp, as well as dollar inflows from a string of banks selling debt, have helped to support the debt, said Ketkar.
Brazilian bonds have rewarded holders with total returns of more than 7.8 percent so far this month, while the wider market has edged only 1.7 percent higher, according to JP Morgan's Emerging Markets Bond Index Plus.
"Today the market continued the trend we saw last week, which was basically a rally in Brazil," said Paul Masco, head of emerging market trading at Salomon Smith Barney.
Venezuelan total returns edged lower, according to the EMBI-Plus. Six weeks into an opposition strike against President Hugo Chavez, fresh street clashes broke out in Venezuela on Monday as international pressure built for a swift end to the crisis rocking the world's No. 5 oil exporter.
Venezuelan total returns have fallen 7 percent so far in January, but analysts say the wider market does not appear vulnerable to contagion from the crisis.
Monday's clashes were the latest outbreak of violence during an escalating opposition strike aimed at forcing the populist Chavez to resign. The shutdown has slashed Venezuela's vital oil exports, causing widespread domestic fuel and food shortages and jolting world energy markets.
Copyright 2003, Reuters News Service