Emerging sovereign debt prices were little changed on Friday amid thin post-holiday volumes, with volatile Argentine bonds still pressured by a recent spike in global risk aversion.
Overall emerging debt returns edged 0.04 percent higher on the benchmark J.P. Morgan's EMBI+ index, following a plunge of 0.56 percent on Wednesday, one day before the US Thanksgiving holiday, and losses of 1.77 percent so far in the month.
Yield spreads over US Treasury notes, a key gauge of aversion to risk, were unchanged at a two-year high of 259 basis points. Spreads had widened 12 basis points on Wednesday with banks cutting exposure to risky assets as they prepare to close their books for the year.
"We have a thin market due to the US holiday," said Lars Rasmussen, Stockholm-based emerging markets strategist with Danske Bank, pointing out however that "risk premiums are rising fast in the most unbalanced economies these days."
Rasmussen mentioned the Baltic countries, as well as Bulgaria, Romania and Iceland as the most unbalanced European economies at the moment. In Latin America, he warned against Venezuelan assets.
Venezuela's benchmark global 2027 bond fell 0.875 point in price to be bid at 97.250. In the beginning of the month, the bond was bid at 109.813. Argentina's Discount bonds slipped half a point in price, to be bid 91.125, adding to losses of 1.687 points on Wednesday.
Losses in the Brazilian global bond due 2040 were more contained. The most liquid emerging market paper declined 0.125 point in price to be bid 133.125, after declining 0.688 point on Wednesday.
Chile's risk spreads widened 4 basis points on J.P. Morgan's EMBIglobal index as the government said the economy slowed down while the current account surplus shrank in the third quarter. Meanwhile, in local markets, yields paid on Mexico's benchmark 10-year fixed-rate bonds declined 5 basis points to 8.07 percent after the central bank held interest rates steady at 7.5 percent.
"In our assessment, the central bank will most likely keep the policy rate unchanged at 7.50 percent for a relatively long period of time, possibly all the way through end 2008," Goldman Sachs' analyst Alberto Ramos wrote in a research note.