Emerging market debt gains on Turkey upgrade; Colombia adds to peso bonds via auction

By Reshmi Basu and Paul A. Harris

New York, Dec. 14 - Emerging market debt moved higher Wednesday on a upgrade by Moody's Investors Service for Turkey.

The goods news out of Turkey helped lift overall market sentiment, remarked sources.

"We saw pretty much everything rally," said a buyside source

In the primary market, Colombia (Ba2/BB/BB) reopened its 12% peso-denominated bonds due 2015 to add up to $250 million via a modified Dutch auction.

The principal and interest are paid in dollars. The minimum yield was fixed at 9.12%.

ABN Amro and Morgan Stanley are lead managers for the auction.

Over to Russia, Vneshtorgbank sold $1 billion of 21-month floating-rate notes (A2/BBB-) at par to yield Libor plus 75 basis points.

ABN Amro, BNP Paribas, Citigroup and JP Morgan were joint bookrunners for the Rule 144A/Regulation S transaction.

Turkey, EM higher on upgrade

Moody's upped Turkey's long-term foreign currency ratings to Ba3 from B1, citing the positive economic, political and social progress Turkey has made over the past four years.

In response, the longer end of the Turkish curve moved higher.

At late session, the Turkish bond due 2030 was spotted at 151 5/8 bid, 151 7/8 offered, up 1¾ points on the day. The bond due 2012 was quoted up a quarter of a point at 126 5/8 bid, 127 3/8 offered. The bond due 2006 was seen unchanged at 106 1/8 bid, 106 5/8 offered.

Even somewhat unsettling news out of Brazil could not upset the market, remarked the buyside source.

Polls suggest that president Luiz Inacio Lula da Silva would lose next year's presidential election, signaling that Lula is indeed losing ground.

Nonetheless, Brazilian bonds rode higher. The Brazilian bond due 2040 added 1.20 to 127.25 bid, 127.45 offered.

Meanwhile the buyside source added that U.S. Treasuries also gave support to emerging markets debt.

The Ecuador bond due 2030 inched up 0.13 to 117 7/8 bid, 118 7/8 offered. The Venezuela bond due 2027 gained 0.95 to 117.35 bid, 117¾ offered.

Argentina higher

The strong performance by the asset class helped Argentinean bonds edge higher.

There are a myriad of concerns such as Argentina's negotiations with the International Monetary Fund and the country's forthcoming coupon payment on Dec. 31, said a source. June and September payments in restructured debt were not interrupted by legal action by holdout creditors.

But Tuesday saw three lawsuits filed against Argentina. Investment management firm Grantham Mayo Van Otterloo is asking for $236 million in principal and interest in federal court in New York.

The source said the country's paper has come under pressure in recent sessions, but saw slightly better bids on Wednesday.

At late session, the Argentinean par bond due 2038 was spotted at 33.30 bid, 33.70 offered, up 0.70.

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