Emerging sovereign debt spreads, a key measure of risk aversion, tightened more than 15 basis points on Friday after the US Federal Reserve acted to curb a growing credit crisis, but still remained almost 30 basis points wider for the week.
The Fed emergency decision to cut its discount rate, charged on direct loans to banks, restored some investor confidence as it signalled US policymakers are ready to ease monetary policy to keep the economy growing. Emerging debt spreads over US Treasury notes tightened 16 basis points to 235 basis points according to the benchmark J.P. Morgan EMBI+ index while bond prices rose.
Brazil's global bond due 2040, the most liquid external sovereign paper, rose 0.938 points to be bid 130.063, after rising as much as 1.313 points earlier. Turkey's global bond due 2034 rose 0.375 point to be bid 104.813 after Merrill Lynch recommended investors to sell the paper, while cutting the country to "market weight" from "overweight" in its model portfolio. The 2017 bond finished the day practically stable, though, bid at 97.813.
In local markets, rates declined sharply. Yields on Mexico's 10-year fixed-rate bonds fell 0.16 percentage point to 7.960 percent while yields on Colombia's benchmark bond maturing in July 2020 declined to 10.545 percent from Thursday's close of 10.609 percent. Brazil's interest-rate futures for January 2010 declined to 12.01 percent from 12.52 percent.
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