Emerging market debt slides on Treasuries; Jamaica sells $250 million 30-year bonds

By Reshmi Basu and Paul A. Harris

New York, Feb. 21 - Emerging market debt slid Tuesday as U.S. Treasuries were unnerved by the release of the minutes from the Federal Reserve's Jan. 31 meeting, which hinted at inflation.

In the primary market, the government of Jamaica priced $250 million of 30-year bonds (B1/B) at 99.471 to yield 8.55% via Deutsche Bank.

Proceeds will be used for budgetary purposes.

On Oct. 11, Jamaica priced $250 million of 20-year global bonds (B1/B) at 98.881 to yield 9 3/8%.

Adding to the pipeline, Kazakhstan's CenterCredit International BV is marketing a $100 million offering of tier 1 perpetual notes with a yield guidance of the 9½% area.

ING has the books for the Regulation S offering.

Next, out of Russia guidance on Sitronics Finance SA's $200 million offering of three-year notes is for a yield of 8% to 8¼%.

ABN Amro and Credit Suisse First Boston are the bookrunners for the company's debut offering of dollar-denominated bonds.

Over to Brazil, Companhia Energetica de Sao Paulo (CESP) revised price talk on its $200 million offering of five-year notes to 10¼% to 10 3/8% from the 10½% area.

Banco Finantia and Standard Bank are joint bookrunners for the Rule 144A/Regulation S notes.

And Brazil's Banco Industrial e Comercial SA (Bicbanco) plans to sell $100 million of 10-year tier 1 notes.

The initial guidance is 9¾% to 10¼%.

Dresdner Kleinwort Wasserstein has the books.

EM slips on Treasuries

Emerging market debt was lower Tuesday as U.S. Treasuries fell after minutes from the FOMC meeting hinted at more interest rates hikes to curb inflation.

"In the view of some members, the possibility of additional policy moves was reinforced by readings on core inflation and inflation expectations that were somewhat higher than was desirable over the long run," according to the FOMC.

In response, Treasuries fell as the focus returned to inflation. The yield on the 10-year note rose to 4.56% from Friday's 4.54%.

Moreover the news weighed on emerging markets, particularly Brazil, as it also had to contend with poor economic news. The country reported a surprising current account deficit for January.

The combination of those two zingers provided investors an opportunity to take some profits, remarked sources.

During the session, the Brazilian bond due 2040 eased 0.65 to 132.10 bid, 132.25 offered, said a trader, who described volumes as moderate.

Additionally with Brazil's carnival celebrations around the corner, investors are insulating themselves, according to Enrique Alvarez, Latin America debt strategist for research firm IDEAglobal.

"People don't want to get overly long here. I think what they want to do is shore up positions. I think that's exactly what occurred here," he said.

Elsewhere in Latin America, state oil producer PetroEcuador began pumping crude oil exports after the company previously shut down a minor pipeline because of protesters, who are demanding a bigger piece of oil revenues.

During the session, the Ecuadorian bond due 2030 lost 0.20 to 98.50 bid, 99.30 offered.

Looking ahead, investors will focus on Wednesday's release of the U.S. Consumer Price Index.

Furthermore, the market will need an upswing in equities for some sort of momentum, noted Alvarez.

"I think we need some sort of equity upside here to continue to lift Latin America," he said, adding that investors would be cautious heading into next week's carnival celebrations. Additionally, that time would likely see bouts of profit taking for the region.

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