08/27/1998 10:39:44 Russian debt trading jumps in Q2 98-traders
LONDON, Aug 27 (Reuters) - Trading in Russian debt rose
sharply in the second quarter of 1998, overtaking Mexican
volumes to become the second most traded emerging debt after
Brazil, the Emerging Markets Traders Association (EMTA) said on
In its regular survey on debt trading volumes, EMTA said
Russian debt turnover in the second quarter reached more than
$242 billion, making up 17 percent of emerging market debt
This was a 33 percent rise on Russia's first quarter
turnover of $182 billion, and 82 percent higher than the $132
billion recorded in the second quarter of 1997.
Since the period of the report, Russia's financial crisis
has sent emerging debt prices into a tailspin and investors have
fled Russian assets in droves.
Prices for Russian dollar-denominated PRINs, for example,
have plunged to 12 cents on the dollar bid on Wednesday from
around 50 cents in late June.
EMTA said total turnover in emerging markets debt
instruments totaled nearly $1.4 trillion in the second quarter,
up 13 percent from the first quarter's $1.23 trillion but
slightly down on $1.42 trillion in the second quarter of 1997.
"Some cross-over investors who left the market during last
year's events in Asia have not returned," Paulo Leme, director
of emerging markets research at Goldman Sachs, said in an EMTA
"In addition, capital flows have been somewhat diverted back
to the U.S. and European markets, as a result of bull equity
markets and continued economic growth."
Brazil continued to dominate, accounting for 30 percent of
emerging market debt transactions. EMTA said Brazilian Brady
bond, Eurobond and options trading rose from the first quarter,
to $287 billion, $59 billion and $31 billion respectively.
Brazilian local instrument trading fell by 21 percent from
the first quarter, to $42 billion.
Brazilian "C" bonds remained the most widely traded
instrument, accounting for 39 percent of Brady bond trades with
volume of $195 billion.
"Investors have been moving towards the more liquid "C"
bonds...at the expense of other emerging market debt
instruments," Barbara Magnoni, fixed income strategist at BBV
Securities, said in the news release.
"Given difficult market conditions, investors tend to shift
towards the instruments with greatest liquidity."
Prices for "C" bonds have also tumbled since the period
covered by the EMTA report. They were at 55 cents bid on
Wednesday, after trading around 74 cents in late June.
Although Mexican debt turnover slipped to third place
overall in the second quarter, at $231 billion, EMTA said
trading in local Mexican instruments reached a record $137
billion, up 33 percent from $103 billion in the first quarter.
EMTA said Argentine debt trading amounted to $183 billion,
continuing a decline which began several quarters ago. South
African trading was fifth at $62 billion, with turnover boosted
by speculation over the depreciation of the rand.
Trading in South Korean debt instruments tripled to $27
billion from the first to the second quarter of 1998 as the
country issued two global Eurobonds, which accounted for 61
percent of South Korean debt transactions.
Volumes for other assets declined, with debt instruments
from Bulgaria, Ecuador, Morocco, Panama and Peru reaching their
lowest levels since EMTA began its survey in 1992.
((Gill Tudor, London Newsroom +44 171 542 6414, fax 583 7239,