Oct. 31 (Bloomberg) -- Emerging-market bonds rose, capping the best week for developing nation debt since December 2001, as efforts by the Federal Reserve and International Monetary Fund to provide liquidity fueled investor demand.
The extra yield investors demand to own developing nation debt narrowed 26 basis points, or 0.26 percentage point, to 6.44 percentage points at 10:28 a.m. in New York, according to JPMorgan Chase & Co.'s EMBI+ index. The so-called spread has narrowed 2.24 percentage points this week.
Investor demand for emerging-market debt picked up as the Fed agreed to provide $90 billion to central banks in Brazil, Mexico, South Korea and Singapore, and the International Monetary Fund doubled borrowing limits for emerging-market countries. A rally in global stocks also helped spur demand for higher-yielding assets.
``The swaps lines from Fed and IMF are good fundamental developments,'' said Edwin Gutierrez, who manages about $5.5 billion of emerging-market bonds at Aberdeen Asset Management PLC in London. ``It seems like we've found a bottom here.''
The gains this week have pared losses triggered by the meltdown in financial markets earlier this month. Emerging- market bonds lost 17.5 percent in October, leaving them down almost 21 percent this year, according to Merrill Lynch & Co. indexes. The securities are on pace for their first loss in a decade and the worst year since at least 1992, when Merrill began tracking the debt.
Argentine Rating Cut
The cost of protecting the debt of developing nations including Russia and Brazil from default tumbled this week. Five-year credit-default swaps based on Russia's bonds fell 3.96 percentage points to 6.68 percentage points, according to Bloomberg data. That means it costs $668,000 to protect $10 million of the country's debt from default.
Brazil's five-year credit default swap slid 2.34 percentage points to 3.49 percentage points this week.
Argentina's debt ratings were cut by Standard & Poor's for the second time in less than three months amid mounting concern the global financial crisis and a tumble in commodity export prices will lead to default.
S&P lowered the South American country's foreign debt rating to B-, six levels below investment grade and in line with countries including Bolivia and Lebanon, from B after cutting it from B+ on Aug. 11. The rating outlook is stable, S&P said.
To contact the reporters on this story: Lester Pimentel in New York atlpimentel1@bloomberg.net;
