Emerging sovereign debt prices ended practically unchanged on Friday, closing a volatile week in which US recession fears and credit concerns raised risk spreads above 300 basis points for the first time in 2-1/2 years.
Yield spreads over US Treasury notes, a key gauge of investors' aversion to risk, finished 5 basis points wider for the day and only 4 basis points wider for the week, at 276 basis points, according to the J.P. Morgan EMBI+ index.
Spreads had widened to more than 300 basis on Wednesday, amid a broad-based equities sell-off that triggered a rush to the relative safety of US Treasuries.
Emerging markets stabilised on Thursday, though, on news that US congressmen had reached an agreement about a $150 billion tax-rebate plan and that help was on the way for troubled monoline bond insurers. "The market has been wandering in line with Wall Street. And today there was no volume at all," said Luiz Felipe Brandao, emerging markets director with Arkhe brokerage in Sao Paulo.
Despite another day of losses on Wall Street, emerging market bonds showed some resilience as investors expect the US Federal Reserve will reduce interest rates by half a percentage point next week, after an emergency cut of 0.75 percentage point on Tuesday. Brazil's global bond due 2040, the most liquid emerging market paper, saw prices edging 0.062 point up, to be bid at 134.125.
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