Brazilian sovereign bond prices surged on Friday as US Treasury prices rose but a weakened dollar strengthened the real, and investors foresaw Brazilian lawmakers passing important pro-market legislation. Rising Treasury prices often buoy emerging market debt, and stronger Latin American currencies lead investors to believe countries will have no problems paying their dollar debt.
"It's unbelievable, it's the perfect environment," said Alberto Bernal, head of Latin America research for IDEAglobal.
Brazilian spreads tightened by 16 basis points on the JP Morgan Emerging Market Bond Index Plus while total returns for the country rose 1.21 percent.
Brazil's benchmark global 40 bond rose 1.875 in price to bid 113.750, taking its yield down to 8.975 percent.
Treasuries prices rose despite healthy retail sales and consumer confidence numbers out of the United States - positive economic news that would normally sink bond prices.
"The data was pretty positive today in the US but Treasuries rallied, and that is really what helped emerging markets here," said a New York-based sovereign debt trader.
The EMBI+ as whole saw spreads narrow by 2 basis points while total returns edged up by 0.64 percent.
The dollar slumped across the board on Friday amid concerns about the United States' growing current account deficit.
Added to the bullish mix for Latin America was optimism that Brazil's Congress may soon pass a stalled bill that would encourage domestic and foreign companies to invest in key public infrastructure projects.
Congressional leaders are saying a deal was struck with members of the opposition to pass the bill, which is designed to lure foreign direct investment to Brazil's ailing transport systems by crafting public-private partnerships.
Economists say poor infrastructure threatens to derail long-term growth here.
In other news, an important international group of holders of defaulted Argentine bonds weighed into a New York Federal court battle against the country for the first time on Friday, suggesting it may itself be considering a lawsuit.
The Global Committee of Argentine Bondholders said it filed a "friend of the court" brief backing a German businessman's petition that the judge block Argentina's restructuring offer.
Comments
Comments are closed.