Emerging-Market Bonds Gain With Stocks; Belarus Sells 1st Bond

By Kejal Vyas Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Emerging-market bond prices rose Monday, tracking a positive day for U.S. equities as investor concerns over the impact of the European debt crisis on the rest of the world continued to wane.

Despite low trading volumes typically seen in the summer months, bid prices on sovereign bonds edged higher, with some hitting all-time-high prices.

Brazil's Global 2034 bond, for example, was recently trading at 138 1/2 on the secondary market, according to Reuters, a new record-high bid.

"The European debt crisis seems to be abating rapidly and that had been keeping a lid on emerging markets from a valuation perspective," said Dan Mullineaux, head of emerging-market debt trading at Knight Capital.

After months of heavy inflows into developing-world bond funds, "it's given managers the freedom to put that money to work," he added.

The risk premium on J.P. Morgan's Emerging Market Bond Index Global narrowed eight basis points to 306 basis points over Treasurys; the index rose 0.19% in price terms.

Buying was particularly strong amid the volatile credits of Argentina and Venezuela, which rose 1.43% and 1.17%, respectively, in price terms. Eastern European debt like those from Poland and Russia also gained on the day.

Positive market sentiment also helped the government of Belarus sell its first-ever global bond Monday, offering investors a yield of 9% on its five-year securities. In a sign that the deal was met with ample interest, the yield came in at the low end of the guidance given earlier in the day.

On the economic data front, Brazilian financial market analysts and economists reduced their estimates for ???the country???'???s ???2010 ???year???-???end forecast for the IPCA inflation rate for the third ???consecutive period???, ???according to the Central Bank of Brazil???'???s market survey.

The average estimate for ???2010 ???IPCA rate was reduced to ???5???.???35???% ???from ???5???.???42???%. ???Despite the reduction???, ???it is still above the central bank???'???s ???inflation forecast of ???4???.???5???% ???for the year???.

Brazil's risk premium on Embig fell 10 basis points to 200 basis points over Treasurys; the index rose 0.49% in price terms.

Elsewhere, Bank of America Merrill Lynch upgraded its 2010 gross domestic product growth estimate for Colombia to 4% from 3.4%, saying that there's a strong likelihood that President-elect Juan Manuel Santos will be able to implement much-needed structural economic reforms to stimulate long-term growth.

The bank also cited recent resilient private consumption and noted that sovereign ratings upgrades from major ratings agencies are also on the horizon.

Colombian bonds on the Embig index rose 0.68% in price terms.


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