Emerging debt-Spreads tighten, Uruguay issues bond swap
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.
"It should also reduce slightly the government's near-term debt service costs, as some of the eligible bonds mature in the next few years and have higher coupons than the 2036 bond, although the debt service savings are not huge given the amounts involved," he said.
Uruguay's global bond due in 2036 URUGLB36=RR eased 0.500 percentage point to bid 103.250 in price and to yield 7.347 percent. For more details see [ID:nN24348017]
In Colombia, the central bank bought $20 million on Tuesday as part of its new policy of trying to control the rise of the local peso currency.
The peso COP=RR touched a nine-year high last week at 1,633 pesos per dollar, and had risen 17 percent against the dollar from January through last week.
The central bank decided late on Friday to keep interest rates unchanged despite above-target inflation. The bank also announced it would buy more than $2 billion to pump its dollar reserves up to $25 billion by the end of the year.
The peso was at 1,747 to the dollar in late trade on Tuesday. (Editing by Leslie Adler)
