Emerging debt-Spreads tighten, Uruguay issues bond swap

By Manuela Badawy

NEW YORK, June 24 (Reuters) - Emerging sovereign debt spreads tightened on Tuesday as U.S. Treasury prices rose on weaker-than-expected U.S. economic data, making it less likely the Federal Reserve will raise interest rates later this year.

Overall spreads, an important measure of risk aversion, tightened 9 basis points to 269 bps over U.S. Treasuries according to JP Morgan's Emerging Markets Bond Index Plus (EMBI+) 11EMJ.JPMEMBIPLUS.

U.S. data showed a slump in April home prices and a drop in consumer confidence to a 16-year low in June. For details see [ID:nN24338474]

Analysts expect the Fed to leave interest rates unchanged at the conclusion of their two-day meeting on Wednesday. The accompanying policy statement, however, will be closely read for clues on whether Fed officials are mulling an increase in rates later this year to combat inflation.

Brazil's global bond due 2040 <BRAGLB40=RR>, considered the emerging market benchmark paper, rose a slight 0.125 to bid 132.688 in price and to yield 5.416 percent.

Meanwhile, Uruguay on Tuesday launched simultaneous bond swap offers for up to $2.9 billion in a bid to extend its debt maturities.

The South American country launched an exchange offer for up to $802 million in dollar- and euro-denominated bonds to mature between this year and 2015. These bonds would be swapped for a global bond due in 2036, which carries a coupon of 7.625 percent.

"If (the exchange) receives full participation, it will take the 2036 issue up to $2 billion. This will make the 2036 a more liquid benchmark, tidy up the yield curve and make the market more attractive to investors," said Stuart Culverhouse, chief economist at Exotix Limited, a London-based brokerage firm specializing in illiquid bonds and emerging market loans.