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Brady Bond Trading Recap

contributed by Credit Lyonnais Securities (USA) Inc.

Tuesday, April 27 2000

Daily Brady Bond Trading Commentary

The Employment Cost Index and GDP Deflator data signaled accelerating inflation in the U.S. After a brief delay, the Treasury market caught on to the news, but equities were undaunted by the prospect of higher rates diluting the value of the exceptional growth expectations built into the value of so many shares. As for emerging markets debt, trading was far less volatile than in equities, and we continue to consider the possibility that the long run prospects for the asset class are improving. As U.S. equities and high yield debt returns slip amid high volatility, the risk/reward tradeoff for owning EM debt is becoming relatively more attractive. In the short run however, the prospects are less bright. The high likelihood of multiple rate hikes in the U.S. in the second and third quarters of this year may keep some money sidelined, and the political risk of several upcoming elections in Latin America may also encourage a wait-and-see attitude.
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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