Emerging market bond prices rose on Friday after a weaker-than-expected US jobs report raised some hopes that the Federal Reserve may give up raising interest rates again in August.
Bond returns climbed 0.34 percent on the benchmark J.P. Morgan's EMBI+ index. Yield spreads over US Treasury notes, a closely-watched measure of investors' aversion to risk, widened 1 basis point to 212 points. Brazil's Global bond due in 2040, the most liquid emerging market paper, gained 0.375 point to be bid at a seven-week high of 125.000.
It had jumped as much as 0.875 point after news that the US economy added 121,000 new jobs in June, less than an average forecast of 185,000 posts according to a Reuters poll.
"We had initially a very positive reaction as the jobs market was signalling that the Fed may halt its interest rate rises before expected," said Diego Beleza, sovereign debt analyst with Prosper bank in Rio de Janeiro.
"But then the possibility of slower economic growth scared investors a little bit in the afternoon," Beleza added, referring to the fact that emerging markets bonds trimmed some of their gains later in the day.
Mexico's spreads tightened 5 basis points to 117 points as the country's assets continued to benefit from the victory of conservative Felipe Calderon in Sunday's presidential elections, despite possible political instability ahead.
Calderon won Mexico's elections with a lead of less than 0.6 percentage point over leftist Andres Manuel Lopez Obrador, who now pledges to challenge the results in court and called on his supporters to protest in Mexico City on Saturday.
Fitch Ratings contributed to investors optimism about Mexico, saying that the country's fundamentals are strong enough to weather any uncertainty arising from the tight electoral results. But Fitch also joined the chorus of analysts who warned that President-elect Calderon will have to hurdle a divided Congress to push his reforms agenda.