Bonds News

EMERGING MARKETS-Latam FX up on prospect of Democrat senate; oil exporters lead gains

    * Mexico, Colombian currencies both add 1%
    * EM bonds under pressure
    * Brazil's real flat as virus fears weigh

 (Updates prices throughout)
    By Ambar Warrick and Shreyashi Sanyal
    Jan 6 (Reuters) - The Mexican and Colombian pesos gained on
Wednesday tracking higher oil prices, while other Latin American
currencies rose as the prospect of a Democrat-controlled U.S.
Senate drove down the dollar and pushed flows into risk assets
outside America.  
    Democrats won one U.S. Senate race in Georgia and led in
another on Wednesday, moving closer to a majority that will
allow President-elect Joe Biden to carry out his agenda.

    That includes increased stimulus measures and higher
corporate taxes. The prospect of higher fiscal spending weighed
on the dollar, while the possibility of higher corporate taxes
hurt the outlook for several U.S. stock sectors, particularly
    In Latin America, Mexico's peso rose 1% against the
dollar while fellow oil exporter Colombia's peso also
surged, as oil prices hit a 11-month high after Saudi Arabia
announced a big voluntary production cut.
    "If you think of the key drivers of EM risk assets - on the
monetary side - it's negative rates. It effectively means that
capital is being moved out of the U.S. into the rest of the
world," said Polina Kurdyavko, head of emerging markets at
BlueBay Asset Management. 
    Brazil's real edged lower, despite data showing an
expansion in the country's services sector through December.
    Latin America's largest economy is among the worst hit in
the world by the coronavirus, and the country is racing to ramp
up vaccinations amid a renewed surge in infections. 
    The MSCI's index of Latin American stocks
rose 1.9%.
    But in the fixed income space, broader emerging market
investment-grade bonds came under pressure from expectations of
increased U.S. debt issuance.
    Abu Dhabi and Qatar sovereign
2050 Eurobonds were 1.8 cents lower at their weakest in two
months, while Saudi Arabia's 2060 issue sank 1.9
cents to its lowest since mid July, Refinitiv data showed.
    "There's a high probability and expectation that in the U.S.
there'll be a blue wave and big infrastructure spending and that
of course means the U.S. government will issue more debt," said
Alejandro Arevalo, emerging market debt manager at Jupiter Asset
    "That has put not just GCC (Gulf Cooperation Council) but
investment grade names under pressure across EM." 
    Key Latin American stock indexes and currencies: 
     Stock indexes              Latest   Daily %
 MSCI Emerging Markets          1318.53    -0.11
 MSCI LatAm                     2495.08     1.95
 Brazil Bovespa               120533.18     0.97
 Mexico IPC                    45876.99     2.16
 Chile IPSA                     4418.05     1.16
 Argentina MerVal              52162.06      1.1
 Colombia COLCAP                1440.24     0.59 Currencies             Latest   Daily %
 Brazil real                     5.2841    -0.39
 Mexico peso                    19.6460     1.18
 Chile peso                       695.3    -0.01
 Colombia peso                  3413.74     0.81
 Peru sol                        3.6237     0.11
 Argentina peso (interbank)     84.9000    -0.11
 Argentina peso (parallel)          156     2.56
 (Reporting by Ambar Warrick and Shreyashi Sanyal in Bengaluru;
Additional reporting by Sruthi Shankar and Tom Arnold; Editing
by Jan Harvey)