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Emerging market debt sees quiet day with U.S. close
By Reshmi Basu and Paul A. Deckelman
New York, Jan. 2 - Emerging market debt was off to a slow start Tuesday, as investors awaited a slate of economic numbers out of the United States.
One source noted that London trading desks were operating with skeletal crews while the U.S. market shut down in observation of last week's death of president Gerald Ford.
However, there was some news out of Brazil that the market will need to digest, noted the source.
Brazilian Treasury Secretary Carlos Kawall resigned from his post last Friday. Since Kawall has been a staunch advocate of fiscal discipline, his resignation raises some concerns as to whether the country will remain on a fiscally sound path, noted the source.
Additionally, there are doubts as to whether president Luiz Inácio Lula da Silva, who was sworn in for his second term over the weekend, will have the ability to implement reforms.
Later this month, Lula will announce a package of measures in hopes to boost the country's economy to a target growth rate of 5%.
Meanwhile, the source noted that the overall mood in the market is upbeat. The asset class will kick off 2007 with historically low spreads as the JP Morgan EMBI+ index touched a record low of 170 basis points versus U.S. Treasuries at the end of last week.
And unless there a major blow is delivered to the U.S. economy, the market is expected to tighten.
However, trading is expected to remain light this week ahead of Friday's release of U.S. non-farm payroll numbers.
Other reports set for release this week include the minutes from the most recent Federal Open Market Committee meeting as well as U.S. durable good orders data.
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