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Brady Bond Trading Recap

contributed by Credit Lyonnais Securities (USA) Inc.

Friday, January 28 2000

Daily Brady Bond Trading Commentary

A confirmation of a stronger than expected economic performance in the USA came this morning when the Commerce Department released their latest figures this morning; GDP grew at 5.8 percent in the fourth quarter. In the minds of most commentators, the FOMC is a foregone conclusion. After some time to reflect, investors bought the long end in the belief that at least one rate hike will control inflation. The likelihood of fewer bond sales by the Government, combined with some buybacks, have made the long end attractive.

Emerging Market bonds, on the other hand, felt the heat of an expected hike in short-term rates which will translate through to higher borrowing costs. All the global bonds were sold and showed significant widening in their spreads to US Treasuries. The market has absorbed some substantial supply since the beginning of the year and investors have only seen losses. Next week will show the way forward but higher rates have never been beneficial for the Emerging Markets.

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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