SPOTTING TRENDS
INTERNATIONAL INVESTMENT, CURRENCIES AND REAL ESTATE

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International Investments



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international investment trends

International Investments in
Emerging Bonds

international investment trends

By
Gary Scott

International Investments Worth the Risk

Recent messages about international investments looked at how safety and opportunity in stock markets around the world has turned upside down. The Emerging international investments market now offers better value than major markets.

International Investments at Bloomberg

Recent articles at Bloomberg suggest that the same may be true in bond markets.

A June Bloomberg article entitled "Ecuador Plans to Swap One-Year Bonds to Help Lower Debt Costs":

"Ecuador, the South American nation that defaulted in 1999, plans to swap bonds maturing in a year or less for new securities due in 2012 and may seek to renegotiate all its debt to cut borrowing costs, Finance Ministry officials said."

The article pointed out that though Standard & Poor had reduced Ecuador's credit rating to CCC that the benchmark 12 percent Ecuador bond due in 2012 yielded 12.7 percent down from 12.8 percent. This was a sign that the market was favoring Ecuador bonds.

International Investments Reasoning

There were several reasons why the market felt that new Ecuador bonds made sense.

First Ecuador, with $15.5 billion of debt, is only the latest country to extend its debt maturities. The UK and France have already sold 50-year bonds to capture low interest rate trends. America is thinking of bringing back 30-year bonds.

Second, the Ecuador government has enough money to cover its debt well into the future and has sufficient reserves.

Third, Ecuador is a large oil producer and has $1 billion of international reserves.

Fourth, The Bloomberg article stated that Jim Barrineau, a senior vice president for emerging markets at Alliance Capital Management Co. in New York who helps manage $145 billion in fixed income securities said he was confident that Ecuador can pay its debt this year, the price of oil is high and tax receipts remain strong.

Fifth, there is no currency risk for dollar investors as the US dollar is Ecuador's currency and Ecuador only has dollar-denominated debt.

international investments in emerging bonds


Ecuador's colonial roots are not confined to the history books, they are visible in everyday life even after almost two hundred years of independence from Spain.  Learn more about Ecuador's history.

International Investments & Merrill Lynch

Sixth, a later Bloomberg message (July 11) stated: "Russian, Mexican, Ecuadorian Bonds Are Cheapest. "

The article pointed out that according to a Merrill Lynch & Co. mathematical analysis the government bonds of Russia, Ecuador and Mexico offer the highest yields for investors,

The article said: "The model suggests that Ecuador, Mexico and Russia remain the cheapest sovereigns. South Africa is now the most expensive credit and is holding that position well ahead of Bulgaria and Ukraine.''

Investors may want to consider a spread of these high yielding bonds.

Russia's foreign currency and gold reserves are now over $150 billion. Russia is the world's No. 2 oil supplier. benefits from record crude prices. Reserves rose by $2.2 billion in the week to $151.8 billion, the central bank said on July 7.

The premium paid over US Treasury note rates last month was in the range of 163 basis points for Mexican bonds, 797 basis points for Ecuadorian bonds and 152 basis points for Russian bonds. A basis point is 0.01 percentage point. In other words Ecuador bonds were paying 7.97 % more than US Treasury notes.

Bonds in Ecuador, Mexico and Russia? This may seem high risk, but times change as does value and a spread of these bonds may add safety as well as a higher return in your portfolio now.

For more information on Ecuador Russian or Mexican bonds contact Thomas Fischer at jbpb.com.

Until next message, good investing!

Gary

international investment trends
International Investments Worth the Risk was written by Gary Scott August 4, 2005.
international investment trends

 

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