Quiet trading ahead of Labor Day weekend; Bank Internasional Indonesia adds to pipeline

By Reshmi Basu and Paul A. Harris

New York, Sept. 3 - Emerging market debt was quiet ahead of the long weekend in the United States, as Friday's jobs data contained no surprises.

The Labor Department reported a modest 144,000 jobs created, which fell slightly below market expectations of 150,000.

Those numbers gave assurances to investors that the Federal Reserve will keep with its "measured pace" strategy for raising rates.

"No shockers," said a trader. "The market is in good shape for when people come back."

The news gave a slight lift to Brazil in Friday's trading. The country's C bond added 0.125 points to 97½ bid while the bond due 2040 was bid at 106.55, up 0.55.

"Initially, there was no trading except for Brazil," said a buy-side source. "And there was a little sell off, but after that there was a lot of buying.

"I think net to net, this number [non-farm payrolls] was not a surprise on either side. It really didn't have a story."

The jobs data ensures that the carry trade will continue and also adds helps investors' perceptions of emerging markets.

"Since we didn't get a very high job number, it's still positive for the long-term.

"The carry trade is on. I think we're going to do well. There's more chance for an uptrade," added the source.

Paper from Mexico and Russia was slightly down Friday. The Russia bond due 2030 was lower by 0.062 to 95¼ bid while Mexico's bond due 2009 fell 0.550 to 114.55 bid.

The Philippines bond was unchanged at 97.625 bid in trading Friday.

Adding to the pipeline of upcoming deals, Bank Internasional Indonesia plans to issue $150 million in bonds.

Brazil inflation, Argentina

Other economic data released Friday included the consumer price index report from San Paolo, Brazil. Indeed, it was more good news for Brazil as the CPI for its largest city grew 0.99% in August, compared with market expectations of 1% to 1.2% inflation for July.

Meanwhile, Argentina's bonds were slightly higher Thursday after Economy Minister Roberto Lavagna announced that investors who agree to the government's restructuring offer would get a higher payment.

The government would put aside a set amount and divide the sum among bondholders who agree to the offer to reschedule payments. Holdouts would be left out in the cold.

"It's a way to lure people in," said a trader. "But not sure about the credibility."

On Friday, Argentina's local paper La Nacion reported that Argentine union leaders and company executives agreed to raise the nation's minimum wage by 29%.

In the last week, President Nestor Kirchner supported the hike, saying that it will fuel domestic consumption.

For the day, the Argentine bond due 2008 lost 0.10 to 29.4 bid.

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