Bonds News

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

    * Mexico, Colombian currencies both add 0.9%
    * EM bonds under pressure
    * Brazil's real flat as virus fears weigh

    By Ambar Warrick
    Jan 6 (Reuters) - The Mexican and Colombian pesos surged 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.  
    U.S. stock futures and the dollar retreated after 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.
    His agenda 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 0.9% 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 was flat in early trade, despite data
showing an expansion in the country's services sector through
    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 1.4% in early trade.
    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 to 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. That
has put not just GCC (Gulf Cooperation Council) but investment
grade names under pressure across EM," said Alejandro Arevalo,
emerging market debt manager at Jupiter Asset Management. 

    Key Latin American stock indexes and currencies:
                              Latest    Daily % change
 MSCI Emerging Markets         1324.08             0.31
 MSCI LatAm                    2480.78             1.37
 Brazil Bovespa              119317.74            -0.05
 Mexico IPC                          -                -
 Chile IPSA                    4374.99             0.18
 Argentina MerVal                    -                -
 Colombia COLCAP               1431.73                0 Currencies             Latest    Daily % change
 Brazil real                    5.2579             0.11
 Mexico peso                   19.6978             0.91
 Chile peso                      693.7             0.22
 Colombia peso                 3410.15             0.91
 Peru sol                       3.6098             0.50
 Argentina peso                84.8900            -0.09

 (Reporting by Ambar Warrick in Bengaluru; Additional reporting
by Sruthi Shankar and Tom Arnold)