Emerging markets up on short session; primary awaits new supply; low trading volumes pervasive

By Aaron Hochman-Zimmerman

New York, April 9 - Emerging market trading volumes were extremely low as desks were emptying and many markets were already closed for religious holidays.

For those left behind at the desks, many took a moment to consider that, after recent gains, prices may be artificially inflated, even as levels were on their way up on Thursday, a trader said.

More supply is expected in the coming week, and the deals are expected to perform well, but a reaction is likely to follow, he said.

From the major markets, equities were better across the board, and by the close of the bond market, volatility had fallen by 1.39 to close at 37.46, according to the VIX index. The index is a common measure of market volatility.

As a sector, emerging markets were seen tighter by 14 basis points to 561 bps, according to JPMorgan's EMBI+ index. The EMBI+ determines the amount of extra yield investors will demand to hold assets in emerging market debt.

Emerging Europe up with financials

Emerging Europe continued to improve or at least hold its values on Thursday, but a trader suggested values are built to last.

There has been "some interest" in the new $2 billion bonds from Russia's OAO Gazprom, and although "I don't think it will do too bad," he said, "I wouldn't hold very long."

The local markets were encouraged by buying back of tier I paper by the major banks, he said.

UBS, Credit Suisse and Barclays in pounds bought back some of their own debt, he said.

"Some now have bids," he said about the financials.

Meanwhile in Russia, Gazprom expects gas output to fall by 10% during the next four to five years, reports said.

The 10% represents nearly 60 billion cubic meters of gas, deputy chief executive officer Valery Golubev told reporters.

In Ukraine, president Viktor Yushchenko suggested he may dismiss the government of prime minister Yulia Timoshenko.

In recent days Kiev has been struck by protests over the country's deteriorating economic condition while the opposition Party of Regions blocks the legislature.

"Despite all political aspects and wrangling, the government is working and will continue to work for a time ahead," Timoshenko said.

Elsewhere, Turkey continued to perform well as the market predicted a deal with the International Monetary Fund soon.

Brazil too stable for LatAm

Latin American markets were closed for religious observances, but one trader expressed concerns that Brazil has been too stable and is perhaps artificially strong.

The bonds have been resilient in the face of withering technicals and it is due for a "turnaround soon," he said.

"Brazil didn't come down much at all," he said compared to the rest of the category.

The real was seen trading at 2.1805 to the dollar.

Also in Brazil, the market awaits the results of a roadshow by Telemar Norte Leste SA for its dollar-denominated benchmark-sized 10-year bond offering. The roadshow begins Monday.

Asia tightens into weekend

In Asia, spreads came in as the market closed the short week with a strong sentiment.

In Indonesia, the state-run energy firm PT Pertamina announced the receipt of a $3 billion standby loan from both national and international lenders, reports said.

"We will use the funds to finance some upstream and downstream projects aimed at boosting oil production and smoothing oil and liquefied petroleum gas distribution to the public," said financial director Frederick Siahaan.

The rupiah was seen trading at 11,205 to the dollar.

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