Emerging debt-Prices flat before key inflation data

By Walter Brandimarte

NEW YORK, May 12 (Reuters) - Emerging sovereign debt prices were little changed with low trading volumes on Monday as investors stepped to the sidelines before key G7 inflation data due later this week.

Inflation fears have been weighing on emerging markets since U.S. crude oil topped $123 a barrel on Wednesday. Despite falling on Monday, U.S. crude oil prices remained above $124 a barrel.

"The debt market has been very slow today. Everybody is waiting for this round of inflation numbers around the world," said Luiz Felipe Brandao, emerging markets director with Arkhe brokerage in Sao Paulo.

Among the main inflation data in the pipeline, investors are focusing on the release of UK and U.S. consumer price data on Tuesday and Wednesday, respectively.

The most liquid emerging market paper, Brazil's global bonds due 2040 BRAGLB40=RR, was unchanged at a bid price of 136.625 at the end of the session.

Emerging debt yield spreads over U.S. Treasuries, an important gauge of risk aversion, tightened slightly, moving in three basis points to 265 basis points on the benchmark JP Morgan EMBI+ index 11EMJ.

Bonds issued by Argentina and Venezuela posted the largest losses. Argentina's discount paper due 2033 ARGGLB33=RR fell half a point in price to be bid 79.250 while Venezuela's global bond due 2027 VENGLB27=RR slipped 0.438 point to be bid 88.250.

Investors remain worried about the prolonged conflict between Argentine farmers and the government over grain export taxes. The main concern is that the protests might once again shut down the country's agricultural exports, which are a key source of revenue.

Venezuela's bonds mostly tracked crude prices lower as oil is the chief export.

Despite a weak performance in the debt markets, Latin American equities closed 1.48 percent higher on the Morgan Stanley Capital International stock index for the region .MILA00000PUS.

The good performance was led by a rise of more than 1 percent on the Brazilian Bovespa index .BVSP, which closed at another all-time high.