• ACI Russia

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

news release.

"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,


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