EMERGING MARKETS-Turkish bonds extend gains; weak dollar lifts emerging assets
By Claire Milhench LONDON, April 12 (Reuters) - Turkish bonds and the lira extended gains on Tuesday, with yields at five-month lows, signalling markets' approval of a compromise candidate to head the central bank, while other emerging assets also mostly firmed thanks to a weaker dollar. MSCI's emerging equity index rose 0.5 percent to eight-day highs, extending gains into a third day benefiting from global equity gains, firmer commodities and positive political developments in a range of developing countries. The lira firmed 0.2 percent against the dollar after Monday's appointment of Murat Cetinkaya as the new central bank chief relieved investors, who had feared a power struggle over the nomination. Local bonds rallied to five-month highs, with yields falling between 6 and 13 basis points across the curve as fears faded that a new governor would heed the president's regular calls for significant rate cuts. Yields fell 14-20 bps on Monday after the announcement. Yield premia paid by Turkish dollar bonds over U.S. Treasuries also narrowed by 8 bps on the day to three-week lows of 286 bps. "The new governor has a pretty good reputation -- he won't be pushed over easily and cut interest rates too fast. He's a prudent monetary policymaker," said Per Hammarlund, chief emerging markets strategist at SEB. Most emerging assets firmed as the dollar index retreated to seven-month lows. The Brazilian real firmed 0.2 percent after strengthening almost 3 percent on Monday when a Congressional committee voted to recommend the impeachment of President Dilma Rousseff. A vote in the full lower house is expected to take place on Sunday. Brazil's London-listed exchange traded equity fund jumped 2.3 percent on Tuesday to its highest level since last July. Five-year credit default swaps (CDS) for both Turkey and Brazil slipped three bps on the day to 371 bps -- near one-week lows -- according to Markit. Analysts at BNP Paribas said fair value for Brazil's 5-year CDS was around 320 bps and added: "Given the dichotomy between market prices and the CDS theoretical fair value, we recommended selling 5-year CDS." A rally in oil prices to above $43 a barrel helped lift Russian dollar-denominated stocks 0.27 percent while firmer metals prices boosted South African stocks 0.63 percent. The rouble firmed 0.6 percent against the dollar and the rand gained 0.22 percent. "It's a broad EM rally that is lifting all boats, even South Africa," said Hammarlund. "There are no clouds in the sky for emerging markets right now -- the PMIs last week were strong or better than expected and that has carried into this week." He added that fewer worries about China, a relatively dovish U.S. Federal Reserve, and easy monetary conditions in Europe were all underpinning positive sentiment. But Ukraine's restructured dollar bonds weakened slightly, giving up the previous day's gains as investors awaited the formation of a new cabinet following the resignation of Prime Minister Arseny Yatseniuk at the weekend. Lawmakers said Finance Minister Natalia Yaresko would not remain in government. Yaresko is popular with investors . "The most important factor is for both the PM and the President to speak with one voice in order to secure not only further IMF fund releases but also to provide for some sort of resolution impulse in eastern Ukraine," Simon Quijano-Evans, chief EM strategist at Commerzbank said in a note. For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s For CENTRAL EUROPE market report, see For TURKISH market report, see For RUSSIAN market report, see ) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg on year Morgan Stanley Emrg Mkt Indx 828.46 +4.45 +0.54 +4.32 Czech Rep 888.31 -5.25 -0.59 -7.11 Poland 1907.34 -6.88 -0.36 +2.59 Hungary 26004.01 -264.41 -1.01 +8.71 Romania 6718.95 +7.03 +0.10 -4.07 Greece 548.90 -12.07 -2.15 -13.06 Russia 902.58 +1.60 +0.18 +19.22 South Africa 45542.53 +336.20 +0.74 -0.56 Turkey 83965.05 -22.48 -0.03 +17.06 China 3024.53 -9.43 -0.31 -14.54 India 25133.02 +110.86 +0.44 -3.77 Currencies Latest Prev Local Local close currency currency % change % change in 2016 Czech Rep 27.01 27.02 +0.00 -0.06 Poland 4.29 4.27 -0.32 -0.63 Hungary 311.57 311.45 -0.04 +0.99 Romania 4.47 4.46 -0.08 +1.13 Serbia 122.72 122.70 -0.02 -1.02 Russia 66.28 66.65 +0.55 +10.06 Kazakhstan 335.37 336.20 +0.25 +1.53 Ukraine 25.45 25.50 +0.20 -5.89 South Africa 14.70 14.72 +0.18 +5.22 Kenya 101.10 101.00 -0.10 +1.09 Israel 3.76 3.76 -0.19 +3.32 Turkey 2.83 2.83 +0.11 +3.12 China 6.46 6.46 -0.01 +0.52 India 66.48 66.28 -0.30 -0.42 Brazil 3.48 3.49 +0.18 +13.62 Mexico 17.58 17.63 +0.32 -2.33 Debt Index Strip Spd Chg %Rtn Index Sov'gn Debt EMBIG 433 -4 .04 7 08.14 1 (Editing by Pritha Sarkar)
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