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Brady Bond Trading Recap

contributed by Credit Lyonnais Securities (USA) Inc.

Monday, January 31 2000

Daily Brady Bond Trading Commentary

Emerging markets debt recovered slightly Monday from the bout of panic selling late last week. Considering the close to US$5.5 billion in new supply (including Turkey) to hit the market in January, prices have held almost as well as can be expected. The EMBI is ending the month about 100 bps wider than at the close of 1999, though most of the losses occurred over two single days. The performance was mirrored in U.S. high yield, as both markets were hit by a combination of higher U.S. interest rates and a slump in equities.

The FOMC announcement and U.S. jobs data this week will set the tone for February. Cash that has remained on the sidelines should be put to work at these spreads, but only if the market is convinced that the Fed has not fallen behind the curve. Argentina and the IMF agreed upon a larger-than-expected US$7.4 billion standby facility, reflecting both the fund's confidence in President de la Rua's fiscal plan as well as the substantial risk behind the country's US$17-18 billion in financing needs this year.

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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