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Brady Bond Trading Recap

contributed by Credit Lyonnais Securities (USA) Inc.

 

Tuesday, April 11 2000

Daily Brady Bond Trading Commentary

The trend of taking direction from U.S. tech stocks is intact, though emerging markets debt showed some ability to de-couple Tuesday. We continue to see trading as dealer-lead, as customers are content not to add on weakness at the moment. We do think that doing so, particularly in Mexico and Brazil, will lead to positive results over the medium term. But clearly EM debt is not under pressure in isolation. U.S. agency spreads have widened out to record levels, as have swap spreads, while investment grade and high-yield corporates under-perform Treasuries as well. This phenomenon has materialized largely because of a set of technical factors, including the retirement of U.S. government debt, that have sent Treasury yields plummeting in the face of several Fed interest rate hikes. Barring the emergence of a true deterioration in credit (most emerging market countries are in a period of positive ratings moves) or an equity meltdown, we believe this disconnect will normalize as well over the medium term.
This report was prepared by Credit Lyonnais Securities (USA) Inc. The information and statistical data herein have been obtained from sources we believe to be reliable but in no way are warranted by us as to accuracy or completeness. Returns set forth in this report are estimates based on internal assumptions, and any changes in these assumptions may have material impact on such estimated returns. This is not a solicitation or any offer to buy or sell securities. We, our affiliates, and any officer, director or stockholder or any member of their families, may have a position in and may from time to time purchase or sell any of the above mentioned or related securities.
 

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