Emerging debt-Spreads narrow slightly, holidays limit trade

By Daniel Bases

NEW YORK, May 5 (Reuters) - Emerging market assets were slightly higher on Monday amid thin holiday trade as stronger-than-expected U.S. service sector data bolstered investor sentiment.

A rise in U.S. services sector activity for the first time in four months initially gave stocks a boost, caused U.S. Treasuries to drop and helped tighten credit spreads for emerging market sovereign bonds.

Yield spreads for the benchmark JP Morgan Emerging Markets Bond Index Plus 11EMJ.JPMEMBIPLUS narrowed by three basis points to 250 basis points over U.S. Treasuries.

But the gains in stocks faded quickly and U.S. Treasuries recouped much of their lost ground.

"Originally the services data resulted in spread compression because of the Treasury downside, but it really had no impact on sentiment whatsoever," said David Spegel, global head of emerging market strategy at ING in New York.

"Sentiment remains pretty good. If you look at the new issuance calendar it is pretty heavy. Generally, that is a positive sign," said Spegel.

Trading was thin with market holidays in London and Tokyo.

According to the ING data, Spegel said so far this year there remains $37.5 billion in sovereign emerging market bonds budgeted for issuance while corporate issuance in the area is roughly the same.