Emerging sovereign debt prices firmed on Friday as investors digested large amounts of debt issuance and on strong equity and Treasury markets. Brazil's global bond due 2040, considered the emerging market benchmark paper, rose 0.187 point to bid 130.00 and to yield 6.514 percent.
"All of the factors that brought us down are beginning to be unwound. We're starting to digest the new supply. The equities market is a little bit stronger today and Treasuries are a little bit higher," said Christian Stracke, lead emerging markets analyst at CreditSights.
Spreads were 192 basis points over US Treasuries, according to J.P. Morgan Emerging Markets Bond Index Plus (EMBI+) with total returns rising 0.11 percent. Emerging markets were flooded this week by a slew of new debt issues and exchanges that topped $15 billion.
Earlier on Friday, Colombia bought back nearly $500 million in global bonds maturing through 2033. The repurchase was financed with funds from a debt sale Colombia offered this week that netted $1 billion. Colombia's spreads widened 4 points to 202 basis points over Treasuries. Total returns eased 0.11 percent.
US Treasury prices rose as investors expect the US economy will continue to slow and that the Federal Reserve will not need to raise interest rates any time soon to curb inflation.
US stocks also climbed as a week-long decline in oil prices and reassuring comments from Cleveland Federal Reserve President Sandra Pianalto about inflation outweighed further signs of weakness in housing. In Brazil, the central bank released the minutes from last week's interest rate-setting meeting stating there is a benign inflationary outlook but that further interest rate cuts may need to be smaller to avoid a pick-up in prices.
"Additional monetary loosening may need to be conducted with more parsimony," the bank said. It cut the benchmark lending rate by 0.5 percentage point to 14.25 percent, a 20-year-low. The monetary policy committee, or Copom, is scheduled to meet next on October 17-18. Mexico's returns were higher than other Latin American country's bonds as investors bought up the weakened credit after a sell-off due to the recent political instability.