Latin American sovereign bond prices soared on Friday, with higher-yielding paper gaining the most, after weak US jobs data suggested the Federal Reserve would not need to hike interest rates more aggressively. Total returns rose 0.81 percent on the JPMorgan Emerging Markets Bond Index Plus (EMBI+). "Everyone jumped in right after the number," said a New York based sovereign bond trader. "Brazil shot up."
Brazil's global 40, the global emerging market benchmark, rose 2.062 to bid 117.625, but the country saw strong gains from the middle to the end of its yield curve. Its global bonds due in 2014, 2020, 2024, 2027, 2030 and 2034 all rose at least two points in bid price.
EMBI+ spreads over comparable US Treasury yields only tightened by 5 basis points because US Treasuries also spiked higher on the news, taking the yield on the benchmark 10-year Treasury note to a 4.077 percent three-month low.
But Brazil's EMBI+ spreads tightened by 15 basis points.
US January non-farm payrolls rose by 146,000, below forecasts of 190,000 and "whisper numbers" of 200,000 or more. December and November gains were revised down. A dip in the jobless rate was interpreted as discouraged workers giving up job hunts.
"This number being weaker just gives people a reason to be a little stronger," said the trader. "No-one seems to be worried about the Fed rate raises that are coming."
Fed hikes raise yields on Treasuries, considered the global benchmark "safehaven" paper. Investors buy emerging market bonds as they offer higher yield to compensate for the greater perceived risk. The less yield "risk-free" US paper offers, the more reason they have to bet on more exotic credits.
Panamanian bonds had a particularly good day. The country's global 08 surged 2.688 to bid 112.813 while its global 27 rose 2.125 to bid 112.500.
Another big mover was Colombia's longest maturity global paper, due 2033, which traded up 2 points to bid 115.000.
Analysts saw a modest rally continuing into next week.
"The market has had a slightly better tone to it and I think that we'll see more upside," said Rashique Rahman, global emerging market debt strategist at HSBC securities. "I don't think we have prospects of a sustained sharp rally but I think that we'll have some marginal buyers over the next few days," he said.