Sovereign Bond Spreads:

 

Significant New Issuance - Commentary:

?	The emerging markets started the week on an extremely quiet note as investors awaited more news from Argentina, in particular, on possible IMF support for the country. The situation started to improve on Tuesday night after Domingo Cavallo's speech intended to support domestic confidence, in which he reiterated that the Argentine government would not default on its debt payments. He also announced some special measures designed to reduce the government's debt burden, such as an acceptance of bonds as payment for past-due taxes and bond coupons for future tax liabilities. This announcement, together with positive clues from the IMF about the possibility of a US$6.9bn disbursement to Argentina, helped the market to rally around 2.5 points. However, the continued fall of international reserves and private sector deposits, evidenced by the latest data release, did not contribute to revive investor confidence and pulled the market down by around 1 point. In Turkey, the week was fairly busy with prices rising on the back of the successful T-Bill auction and as a result of a technical short squeeze. Real money accounts and local banks were active buyers of Turkish bonds helping the Turkey 2030 benchmark to break through an important resistance level of 80. Russian market activity picked up on the positive news from Argentina, but the rally was not sustained and Russian bonds closed almost unchanged on the week. Central and Eastern European assets had a positive week gaining around 0.25-0.50 points in price. Overall, the general sentiment in the emerging debt markets has improved but is still very much subject to stabilisation in Argentina. The EMBI+ Index tightened around 20 bps on the week to at +896 bps level on Friday.
?	The United Mexican States (Baa3/BB+) placed a US$1.5 bn 8.30% issue due 08/2031 on Monday. The bond was priced at a spread of +335 bps over Treasuries. The fact that a Latin American issuer was able to successfully place such a large transaction is a good sign that the impact of the Argentine crisis is limited and has not shut down the primary market for borrowers.
?	The Republic of Latvia's (Baa2/BBB) credit rating outlook was raised by Standard & Poors from "Stable" to "Positive" reflecting an improved spending control and better perspective for GDP growth.