LONDON, May 1: Emerging debt prices continued to firm on Friday in reaction to positive news on the U.S. Economy but volumes were thin with European and Latin American markets shut for the May Day holiday."The market has remained strong and there has been no weakening at all but it's really dead," said one Brady bond trader at a European investment bank in London.
Among the more liquid assets, Russian were 1/8 better at 63-1/2 bid and Brazilian "C" bonds were unchanged at 82-3/4 bid.
Traders said U.S. Economic data released on Thursday underpinned emerging debt markets as the "Goldilocks scenario" of low inflation and strong growth dispelled fears of an imminent rate rise by the Federal Reserve.
They said the Fed was unlikely to tighten credit at its next Federal Open Market Committee Meeting (FOMC) on May 19 given the data.
On Thursday, emerging debt markets rose sharply in line with U.S. Financial markets after the closely-watched U.S. Employment Cost Index (ECI) rose 0.7 percent in the firstquarter.
"The ECI threw that notion of a rate hike in May out the window," said another trader at a US Investment bank in London. "Maybe we will get it later in the summer but it will be very, very difficult for the Fed to do anything in May."
The emerging debt markets were now expected to focus on other key U.S. Data due out over the next week but traders said spreads should continue to tighten.
The data includes the National Association of Purchasing Management (NAPM) index due out later today and the April unemployment report due out next Friday. "We will stay strong for the moment and we probably will see more (spread) tightening as time goes on," said one trader.
In coming week, traders said the market will also keep a close eye on developments regarding the social security reform vote in Brazil and news from the International Monetary Fund on the release of funds to Russia.
Russian Finance Minister Mikhail Zadornov said on Thursday that talks between Russia and the IMF were going well andthat the country should receive the next tranche of around $700 million from its loan programme soon.
But traders said they will be watching for positive comments from the IMF next week.
"Things are looking good in Russia but we have to keep an eye on what happens with the IMF and as long as that goes well, everyone will be happy," said one trader.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
