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Randall,
> Anybody looked at Mexican CETES yielding about 21% as an investment
> vehicle? Possibly hedging the position with Peso futures?
> Comments/ideas?
The hedge will take a lot of the yield away. Have a look at USD
dominated bonds.
Yes, all emerging market debt has been hammered because of this
global crunch. Only US high tech stocks have been late :-)
I like Russian debt. Russian USD dominated eurobonds are trading at
25 cents in the dollar - whichever maturity over 2 years (this is a
yield of over 40 % annually - higher than for any other African,
South American or whatever state bonds in the world). Basically
the market discounts that Russia will default on them. Only a year
ago international Banks were falling over themselves to give loans to
Russia. There is even a 30 Year bond outstanding - would you believe
it ? Now it is assumed that Russia is bankrupt.
The Russian government has decided to screw their own banks
and investors who have invested in their DOMESTIC GKO bonds and made
a unilateral default and rescheduled their debts - they even stopped
the forward contracts in the USD/Ruble market. This way the Russian
government saves something like 25 Billion dollars of debt repayment
- this is good.
But will Russia ever let EUROBOND fail ? Propably not unless they
never want to borrow again abroad - even Mr. Chernomyrdin says that
they want to pay and they did pay so far. Does anyone listen ? No !
So last week these eurobonds were trading down to 18 % currently they
are trading at somewhere 22% and 26%. So what's the deal ? Either
Russia stays in trouble then these bonds trade perhaps back to 18% or
Russia is suddenly perceived differently and Russian bonds trade on
the same level like Indonesia, Nigeria etc. that would value them at
somewhere between 45 % and 70 %. BTW: these bonds carry a cupon of
10%. In any case the risk reward ratio on these Russian bonds is
favourable.
I expect that Clinton understands the general fragility of
the world financial situation and will comfort world financial
markets that Russia will not disappear from the face of the world. To
help Russia is a very small price to pay to prevent the crisis from
spilling over completely to Latin America.
You might be interested in
http://www.bradynet.com
which is an excellent site for emerging market bonds.
Gerrit
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