Argentine and Venezuelan bonds led losses in emerging debt markets for the second consecutive session on Friday as investors feared a possible portfolio rebalancing by ABN Amro Asset Management, which has large exposure to both countries.
Bonds issued by both countries were already pressured by a considerable supply of new sovereign debt and, in the case of Argentina, by concerns about the integrity of official inflation data. Argentina's Discount bonds declined 1.750 points to 111.000 after plunging more than 3.5 points earlier. The country's risk spreads widened 18 basis points according to J.P. Morgan's EMBI+ index. Total returns on Venezuela's bonds declined 0.62 percent on the EMBI+. They had fallen more than 1 percent earlier.
"There are fears of liquidation of an asset management fund that owns a big chunk of bonds issued by those two countries," a Latin America debt strategist with an European bank said in New York, referring to the ABN Amro jitters.
"That is contaminating the long end of the Argentina and Venezuelan curves. Liquidity has disappeared and trading conditions have deteriorated," the strategist said. ABN Amro confirmed that Rafael Kassin, who managed the bank's $3.5 billion global emerging debt portfolio, resigned this week and will be replaced by its current chief executive officer, Paul Abberley, and Senior Portfolio Manager Alan Bridges.
The bank gave no details, however, about the fund's future strategy. Other analysts, like BBVA's Paula Gandara, pointed out that Argentina's bonds had been performing very well since the beginning of the year, becoming vulnerable to profit-taking.
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