emerging debt-spreads tighten on brazil upgrade, n
Emerging debt-Spreads tighten on Brazil upgrade, new issues September 9, 2004 4:30pm ET (Reuters)
By Tomas Sarmiento
CARACAS, Venezuela, Sept 9 (Reuters) - Emerging market bond spreads narrowed on Thursday, boosted by a credit rating upgrade on Brazilian bonds and Turkey's announcement it will issue new debt.
Turkey, the fourth-most-liquid credit in the asset class, led the market by narrowing its debt spreads to comparable U.S. Treasuries by 17 basis points to 308 bps on the news it will float a five-year euro-denominated debt issue with a 5.75 percent yield. The issue is to be priced on Friday, at the latest.
Spreads of the market as a whole narrowed 5 basis points to 424 basis points, according to J.P. Morgan's Emerging Market Bond Index Plus.
Sources close to the Turkish deal have said the issue will be benchmark size, which typically means over 500 million euros (about $610 million).
Turkey has been benefiting from recent improvement in economic conditions and increased appetite for higher-yielding emerging bonds due to the slower-than-expected recovery in the United States.
"Turkey is a main market mover today, aside from yesterday's Brazilian issue that is still moving things today", said one New York-based trader.
On Wednesday, Brazil launched 750 million euros ($915 million) in bonds due 2012 priced at 98.881 percent of face value, with a coupon of 8.5 percent and a spread of 4.7 percentage points above comparable German treasuries.
BRAZIL MOVED UP A NOTCH
Credit rating agency Moody's Investors Services upgraded Brazil's sovereign credit rating to "B1" from "B2", with a stable outlook, due to continued export growth that has reduced its external debt.
Fitch also assigned a "B+" rating to Brazil's new debt issue, citing an improved debt standing, including a "marked turnaround in international trade performance." The rating was widely expected by the market and has a stable outlook.
Brazil's debt spreads to comparable U.S. Treasuries widened by five points to 501 basis points. The country is the most traded in the market and accounts for 23.49 percent of the EMBI+ capitalization.
Analysts said the market was expecting a wave of new issues, including from state and private corporations in the region.
On Wednesday, the Philippines sold $1 billion of reopened bonds.
"That is kind of the theme here, investor bankers are telling the issuers: 'Do it now while the conditions are right, don't wait until later,'" said Christian Stracke, an analyst with New York-based research firm CreditSights. End of Story
