The LATAM debt class was successful in dipping back beneath the 300 bps spread differential marker yesterday thanks to the strong change in risk sentiment reaching the category from the side of US financial markets. Crude oil was a major component of the intra-day story, this time due to unexpected gains in US inventories for both crude oil and gasoline. Futures prices sank by another US$3.67 p/barrel, leaving August contracts to trade minimally above US$135 p/barrel in late NY hours. In reversing the working order of the components governing the major markets, it was this downfall in crude that motivated US equity investors to cover shorts, while also bolstering the USD on the insinuation that the fierce headwind represented by crude prices for the US economy could be finally easing. The DJIA and the S&P recovered by +2.5%, while the NASDAQ surged by 3%, re-energizing the environment for risk absorption. The greenback fought back the depreciative attacks of the last couple of days, rallying to 1.5812 against the Euro in late NY hours. The sovereign class gained moderate impulse from these developments in the US market, but that was not all that impacted intra-day dynamics. US CPI for June provided another shock to the inflation doves, as headline came in at an impressive +1.1%, bumping y/y June totals to +5.0%. This data point appeared lost in the background for the most part during the day, due to the overhang of talk related to the GSE's and the assumed deflationary effects of the sell-off in crude oil. However, once the risk tables turned positive due to the equity market rally, US Treasury yields inflated mildly off this factor and the CPI in combination. Hence, the environment for LATAM was another repeat of cross-currents, with soothed risk jitters off-set by the negative bond pricing effects exerted by 10-year paper US Treasury paper movement to 3.93% yields. Individual highlights in the region involved three different sovereign credits. Ecuador removed under pressure in what we deem an extension of liquidation before the September referendum on the Constitution and the overhang of increasing nationalist policy skew. The 2030 Global again presented with a very wide 89 ¼ / 91 ¾ bid/offer split at the close, with bid levels indicating another drop of about 2 points for the credit. Colombia returned to its FTA watch as US House Republicans, through a letter to Speaker Nancy Pelosi, attempted to pressure for a vote on the accord. At the same time the US Secretary of Agriculture was set to travel with lawmakers to Colombia this weekend, adding additional count to the long list of administration figures visiting in attempting to maintain the spotlight on this nation and the pending accord. Bids on the 2017 bond were upped by ½ point, which allowed spreads to move inward by 17 bps. Reports out of Mexico indicating additional negatives in the medium-term prognosis for the Cantarell oil field placed this nation's energy reform package back into the limelight. The forecast put forward by PEMEX indicates a 40% contraction in oil production to come for this field from current levels by 2012 (to 600K bpd from slightly over 1MM bpd currently). Bids in the 2031 Global appeared soft at 124, despite a 5 bp spread compression due to the rising yield movement in US benchmark paper. On the LATAM domestic plain only the BOVESPA and the IPC were able to emulate the US equity indices with gains of over +1.70% for each, as other major regional indices grappled with the implied negatives of lower demand for commodities inferred from the latest economic assessment put forward by Fed Chair Ben Bernanke. Mexico was the star of the show in the currency arena, as the MXN broke below prior resistance to 10.2425, a gain of +.46%, with upcoming CB action on rates the continued underpinning for the bulls in this market.

It was a day-long festival of top-level testimony and supporting rhetoric for the US mortgage sector that occupied the field of vision of the global financial markets on Tuesday, with extremes in volatility in numerous markets engendered by the revelations offered. Most eyes remained glued to the testimony of Fed Chair Ben Bernanke and that of Treasury Secretary Paulson during their respective interventions before the Senate Banking Committee, with the presentations producing market-moving assessments of the economic moment in the US as their main output. Mr. Bernanke's description of worsening conditions for the dual dilemma at hand, US growth and inflation, beat the US markets into retreat, at least in the early going of yesterday's session, while the Paulson push for legislation to allow Treasury to reach out financing to the GSE's only allowed short-sellers to return to pressure these stocks, pushing US equities full circle to losses at the closing bell (DJIA -.84%, S&P500 -1.09%). There was a strong intermission on the intra-day pressure on US equities courtesy of the crude oil markets. Rumors had their way with pricing in this arena. At one point during the day crude was lower by a whopping US$9 p/barrel, as a combination of creative speculation grasped this market. Supposed liquidation of long positions by a bank on the verge of failure were met with voices of an impending agreement on Iran's nuclear program, both of which were nothing more than wishful thinking. Mr. Bernanke's increased assessment of risk to growth in the US also certainly had a hand in the mayhem in the crude pits. Ultimately, August crude changed hands at US$138.76 in late NY hours, off nearly US$6.50 p/barrel. Economic data reports in the US that were on the table before the interventions at the Senate Banking Committee had already set negative precedent for the US outlook. Retail sales in June were up only +.1% due to a dismal display in the sale of automobiles, which implied actual negative figures when inflation is factored in. The headline figure on US PPI (+9.2% y/y for June) had the markets blazing with renewed talk of inflationary pressures and the Fed's disregard for the same. LATAM wasn't devoid of its own developments that filtered into debt prices. Brazil's solid May retail sales gains (+10.5% y/y) contrasted sharply with the panorama in the US, while allowing a moderate return of optimism that shielded the domestic spectrum from US contagion. Government supporters and those backing the position of the agriculture sector in the tax levy dispute, showed their strength in rallies on the streets of Buenos Aires, with today's decision from the Senate on the matter looming as critical. Ecuador again produced headlines tending towards a nationalistic optic, a negative for sentiment towards this credit. In the latest development, Ecuador indicated that it could terminate its agreement for oil production with PetroBras and Perenco if no consensus is reached to modify the present contracts for new pacts in which they become simple oil field operators. Peru's new Finance Minister Luis Valdiviezo immediately set to work on coordinated action with the CB in regard to inflation measures, leaving social instability and demands apparently on the backburner. Ecuador's Global of 2015 fell another point on the bid side to 97 ½, while Brazil's 2034 Global steadied to 122.20 bid in holding essential support levels. Venezuela's 2027 Global dropped by 1 point due to the fallout produced by tumbling oil, leaving this credit with bids at 90 ¾'s. The two major regional equity markets ignored the travails of the Dow, while the rest of this line-up fell by over 1% in each location. Currencies were a mixed bag on the back of a churning USD. The CLP and the COP continued to diverge, with the former higher to 491, while the latter retreated by -.65% to 1771.

Local markets in Brazil and Mexico both took the possibility of lower US rates as an added element of flexibility brewing for domestic monetary policy. Rates in both locales moved lower, with Brazil particularly pronounced notwithstanding the humming ring of retail sales for May. Compression was strong in longer-date paper, headlined by the 20 bps drop in the 2012 NTN-F yields (14.953%). Mexico was much more modest in its yield retraction, with 3 to 4 bps lower yields the average along the curve. The large inversion between the July 2010 NTN-F and the 2017 NTN-F is an interesting bear steepening play to consider.

The start of the week proved to be one of mild weakness for the LATAM debt market and it wasn't because of faltering internal dynamics. The watch on the latest protagonists in the US mortgage meltdown drama, Fannie Mae and Freddie Mac, intensified during the weekend due to initiatives put forward by US Treasury Secretary Paulson to ensure liquidity levels and available financing for these entities. Promises of the availability of the Fed discount window, on top of the possibility of equity positions by the government in these corporations was enough to take the jitters out of the US financial markets at the start of trading, but the ultimate result was less well-defined. LATAM was provided with conflicting external signals as a consequence of the concentration of the global markets on this US mortgage market theme. US equities slipped after holding sturdy initial gains. A loss of -.9% in the S&P and one of -1.2% in the NASDAQ spoke of a continuity of the uneasy psychology still gripping US equity investors. On the other hand, US Treasuries broke with the observed playbook of last week and entered a short, but noticeable, run towards flight to quality. This forced 10-year paper to contract in yield terms to 3.86%. USDollar weakness versus the Euro (1.5902) and steady astronomical crude oil prices (August US$145.15 p/barrel) went largely unnoticed given the heavy noise factor associated with the US proposal aimed at bolstering Fannie Mae & Freddie Mac. Within the confines of the LATAM boundaries there were some developments that filtered into the sovereign bond price equation. Peru received further approval of its solid performance on the economic and fiscal front with the ratings upgrade handed to this sovereign by S&P, which matched the prior action of Fitch in placing a BBB- qualification on this paper. The admission by President Correa that he would be eager to stand for re-election if a measure put forward by the Constituent Assembly is approved in the upcoming Referendum spooked an additional lot of investors rapidly coming to grips with the change in panorama in Ecuador. An extension in the period needed for the Senate to vote on the grains export tax until Wednesday of this week keep a negative flavor tied to Argentine bonds. News that the government had agreed to buy back Aerolineas Argentinas from Spanish consortium Marsans also affected sentiment related to the free enterprise and nationalization advances in this nation, an added negative to an already discolored environment. Panama checked-in with negative news on the inflation front. June CPI reached +1.2%, lifting the y/y figures to a scary +9.6%. Andean sovereigns appeared to be the weakest link in tallying the intra-day performance figures. Peru's upgrade by S&P looked fully factored in, which left the credit looking at the troublesome social situation inherited by the new Economy Minister Luis Valdiviezo. Bid prices for the 2037 Global bond descended by 1 point to 99, which widened spreads by 17 bps on this side of the market. Argentina's 2033 Discount bond fell by ½ point on the bid side to 72, which established a new price low at this level. Ecuador's 2030 Global bond posted a very wide market at 90/93 at the close, with the bid side representing another fall of 1 point in price terms. Anticipating likely negative impressions to come from upcoming inflation data, Uruguay's 2036 Global shed 1 point to 99 ¾'s, rapidly closing in on losing 10 points overall on the year. Regional equity indices shunned the bearish leadership provided by US stock markets, preferring to concentrate on local trends. The IGRA led the way in assimilating the S&P ratings positives, enough for a rise of +2%. The back-pedaling nature of the USD and statements rendered by both the CB head Jose De Gregorio and Finance Minister Velasco before Congress on the upward skew of interest rates and the need for additional fiscal policy to control inflationary expectations put the CLP in the driver's seat within the regional currencies. An upswing of over +1.5% in this currency to 495 levels ensued, topping the LATAM class in currency performance on the day.

Extreme whipsaw action in the US equity markets, created by incessant rumors and speculation related to Fannie Mae and Freddie Mac, were the dominant features for the global trading environment as the week drew to a close last Friday. LATAM remained attached at the hip to these external influences, which again acted as core price drivers for the category. On the day, both the DJIA and the S&P500 lost a little over 1%, but this failed to fully reflect the unpredictable swings produced intra-day, which kept LATAM off balance and mostly on the defensive due to the transmission of decreased risk tolerance parameters. The entire day, however, didn't come off as a loss for the LATAM debt camp, as a surprise lift in US Treasury rates (10-year note quoted at 3.967% yields at closing) allowed the entire category to post spread compression, notwithstanding some rather important underperformance in $ price terms for the high-Beta camp in particular. The panicky nature of the US equity markets on the supposed liquidity conundrum surrounding Fannie and Freddie obscured another shocking bull surge by crude oil markets, with August futures printing new historical tops above US$147 p/barrel before tapering off to end the session at a still impressive US$144.82 p/barrel level. Argentina led the list of unworthy returns with LATAM, with investors using the backdrop of US instability to short more paper as a hedge against unknowns in the discussions taking place in the Senate this weekend on the grain levies. Discount's dropped to 72 ½ bid, lower by 1 ½, with spreads inching in on +700 bps spreads. Ecuador remained in least favored status due to the overhang of this week's confiscatory action on private property and the mandate given the government by the Constituent Assembly that would allow an extension of these measures towards entities tied to former banking owners. The 2015 Global dipped by ½ point on the bid side but with noticeable spread retraction (-11 bps) complements of the US Treasury curve. Colombia re-entered a defensive mode due to the US turbulence, giving the 2037 reason to drop over 2 ¼ points on the bid side to 105 ¾'s, while spreads moved outward on thi98s side of the market by 5 bps. Peru also joined the downside fray, with higher official domestic rates (6%) sanctioned by the CB on Thursday evening and dipping trade surplus reported Friday tempering enthusiasm, alongside the previously mentioned anxiety volunteered by US financial markets. The 2037 Global dropped by 1 ½ points on the bid side to par, while spreads were still able to squeeze out a 1 bp tightening. Regionally, equity indices had little place to find shelter from the see-saw battle in US stock gauges. All the major indices posted losses of 1% or more due mostly to contagion, though the IPC (-.94%) and the IGRA (-.76%) didn't break this barrier. Currencies were also dominated by risk fears. The COP was the most affected in this sense, losing nearly 1% on the day in backing to 1766, while both the CLP and the PEN backtracked by over -.6%.

Local fixed-income markets in Brazil and Mexico reversed course on the decreasing spread pattern of past days, affected without doubt by the unstable nature of US financial markets. In Brazil, the curve hump at the 2010 maturities became slightly more pronounced, while longer-duration paper moved in a tight range. Mexico had pretty symmetrical widening along most of the points on the MBond curve, with spread moving out between 5 & 6 bps. Next week's determination on interest rates by Banxico was still very much a focus, but briefly overridden by the US convulsion.

The sovereign debt category at-large maintained its poise yesterday in dealing with another heavy bout of volatility on external markets, which came alongside uneasiness injected into market psychology by strong swirls of rumors involving the US investment banking camp. The US hoarded most investor concentration as jitters related to the GSE's remained as ballast weighing on the equity markets. Rumors related to counter-party acceptance of a bulge-bracket firm were clearly denied, but still caused anxiety, while testimony offered by both Fed Chair Bernanke and Treasury Secretary Paulson before Congress briefly boosted confidence on the front of continued financing for the financial community. However, it was crude oil that had the heaviest incidence in determining the temperature of the external markets. Another reported Iranian missile test and the lifting of a case-fire in the Niger Delta produced enough momentum to force shorts in the crude pits to capitulate, with the subsequent technical rally driving this market higher by a hefty US$5 p/barrel, which placed the August contract again above the US$141 p/barrel mark. The overflow back into the equity realm produced a whipsaw, with the key indices still presenting gains at the end of the day of about +.7% (DJIA & S&P). Treasuries were a non-event, as the 1-year note held 3.80% yields, avoiding the usual roll into defensive mode amid the worries related to the financial sector. On the LATAM sovereign playing field there were two distinct groupings: high-Beta, which underperformed, and core credits, which were only a touch lower. Ecuador rolled lower due to a measure passed Wednesday evening by the Constituent Assembly that allows the government to seize existing property linked to any banking groups involved in the bankruptcy crisis of 1999, which essentially extended the reach of the administration after Tuesday's confiscation of firms and media associated to the Isaias group. Ecuador's 2030 Global dropped to 90 ½ bid, a decline of 3 ¼ points, though the bid/offer split was quite wide at day's end. The unknown result of the Senate battle over the soybean sliding scale tax in Argentina served as a catalyst for a moderate markdown in this paper. Argentina's 2033 Discount again flirted with new lows in closing at 73 ¾ bid, lower by ¾ points. Venezuela failed to incorporate the bounce in crude oil prices. In this regard, the official confirmation of a trip to Russia on July the 22nd by President Chavez accompanied by a side note on a review of Russian armament (tanks) to take place during the same could have impacted sentiment. The 2027 Global rolled down to 92 ½ bid, off ¾ points on the day. Regional markets were mixed. The BOVESPA side-stepped a threatened strike by PetroBras oil workers and rose +1.2%, in sync with Wall Street. The rest of the regional equity gauges were mostly negative, with the exception of the IGRA. The CLP (499.20, up ½% on the day on the +50 bps rise to CB sanctioned interest rates) and the COP (1749, off -1.20% on anxiety over the external environment and overbought conditions) were the standouts on the currency plain.

The calm behavior of the LATAM debt category amid an uneasy and volatile external financial market environment, where US equities again suffered large losses of 2% or more, was the highlight event of Wednesday's trading session. Ecuador again had the leadership baton in hand, though this time around bond prices for this credit moved in a positive manner. Barely hours after spooking the markets with her less-than-friendly rhetorical introduction related to debt servicing commitment, Ecuador's new Finance Minister, Wilma Salgado, was quick in understanding and deflating market anxiety with new statements confirming that this nation had the resources and would continue to make debt payments during 2008. Ecuador's debt paper thus produced a noticeable rebound, though without fully cancelling the declines experienced on Tuesday. The 2030 Global was the most benefitted instrument, climbing ¾ points to 93 ¾'s on 5 bps tightening. The reverse end of the performance spectrum was occupied by Venezuela, with lackluster behavior on the part of the crude oil markets (August traded lower to US$135.62 p/barrel despite an Iranian missile test and lower weekly US stocks) the culprit for the slight downtick in bond prices belonging to this credit. The 2027 Global backed mildly to 93 ¼ on the bid side, off ¾ points but still very much within a well delimited range. Two of Peru's key benchmark papers, the 2025 and the 2037 Globals tightened by 2 and 3 bps, respectively, which was very much a surprise given the domestic uncertainty stirred by yesterday's national strike. Brazil widened lightly but failed to crack through immediate support still upholding bond price values. Externally, another leg lower for US Treasury yields also served as a catalyst for the sovereign debt grouping. US 10-year paper lost nearly 8 bps in yield terms, settling at 3.809%, obviously a symptom of equity-induced risk aversion. Regionally, the renewed Wall Street bashing appeared to have its largest fallout in the IPC in Mexico (-1.60%), though higher June inflation at the consumer level (+.42%) also appeared to unnerve investors fearful of higher rates to come, while profit concerns on AmericaMovil also appeared to take their toll. The IGRA in Peru recovered +1.11% of the prior day's losses, using a bounce in base metals as propulsion. Expectations of higher rates to come helped the CLP, COP and PEN to gains that ranged from +.36% for the first of these credits to +.62% for the COP.

The financial markets were full of turbulence again on Tuesday, with LATAM taking an active role within this characterization. Ecuador was the core focus of the LATAM debt world on the day due to unforeseen domestic developments that placed this credit in a completely different light than the existing environment of investor confidence in debt servicing. For starters the Correa administration took over two TV stations that had nationwide reach with their broadcasts, while the Deposit Guarantee Corporation ('AGD') seized 193 commercial firms, with both events looking to link ownership of these entities with the Isaias group, a business group infamous for the bankruptcy of its Filanbanco unit, which was Ecuador's largest bank at the time of its demise in late 1998. The measure apparently generated the opposition and resignation of Economy Minister Fausto Ortiz, who had served as a buffer for relations between Ecuador's left-leaning and the financial markets. President Correa proceeded to nominate and swear-in former AGD head Wilma Salgado as new head of the Economics ministry, with Ms. Salgado immediately taking to the charge against bond investors. Using direct rhetoric, the new Minister expressed her allegiance to social causes over debt servicing, while promising to enact measures to sanction 'irregularities' occurred in the course of managing the nation's debt obligations. The large and unexpected turn of events fell like a bucket of ice water on Ecuador's debt holders. Selling emerged across all three of Ecuador's traded USD Globals, with losses for the 2030 Global mounting to 4 points on the bid side (93 bid on the close, with spreads wider by 52 bps), while the 2015 bond reaching 3 ¾ points on the bid side (99 close) with spread extension of a whopping 70 bps. Ecuador's prominence obscured the external market volatility that occurred away from LATAM. Crude oil markets were essential in this realm, with futures prices dropping a very hefty US$5.35 p/barrel, leaving August contracts barely above the US$136 p/barrel mark. This added to the negative sentiment already pervading Ecuador and also rapidly infected confidence in Venezuelan paper leading to a 1 point drop for the 2027 Global of this sovereign (93 ¾ bid to end the afternoon), with corresponding spread widening of 18 bps. While the market awaits the Senate vote on the legislation backing the tax levies on grain exporters, news of another abrupt drop in construction activity in Argentina (+1.35% y/y for June and -4.82% for the m/m change) renewed fears related to a weakening economy. The added jitters moved the 2033 Discount in reverse once more, with bids settling at 75 on the day, off 1 point and wider by 20 bps. The farmers strike gripping Peru failed to trickle into debt prices, as did the tentative intra-day showing of copper and zinc prices. Peru's 2037 Global actually added 7/8's of a point on the bid side, which lifted prices on this side of the market to 101 ½, eliciting a 4 bps tightening move. The rest of the sovereign debt camp was mostly mixed, with another small tap to 3.888% yields in the US 10-year giving slight positive skew to the pricing equation. The decompressing effects of crude oil prices on US equities (DJIA higher by +1.36%, while NASDAQ rallied by +2.28%), allowed some breathing room for certain LATAM stock markets, notwithstanding the key role of oil corporations in these latter indices. The BOVESPA rose by +.76% in representing this grouping. The IGRA in Peru felt the brunt of the run on mineral prices mentioned above, with this index off by over -3.4%. Currencies were also divided in their daily tallies. The CLP gained on the back of the fall in crude to 504.30 (+.69%), while the PEN jumped by a little over 1% to 2.8181 on expectations of strong rate action by the CB this coming Thursday.

LATAM sovereign bonds started the week with a surprising bout of positive price performance amid a chaotic and volatile external environment as key price-driving influence. US Treasuries were again subjected to multiple rolling bouts of flight-to-safety buying, which should have been a strong input for LATAM to navigate towards more defensive surroundings. However, this was not to be the case, as the 10 to 11 bp compression suffered at the 10-year maturity by US government paper (3.90% yields at day's end) only served as a catalyst for most LATAM external bonds to move higher in keeping near symmetrical pace on the spread side with this benchmark. This also allowed LATAM to side-step new jitters in the US equity universe (DJIA -. 5% on the day) related to the speculation on the GSE's (Fannie Mae, Freddie Mac) and their need for additional capital. Also in whipsaw mode was the USD, which went into depreciation mode once the financial anxiety had gained speed on the equity turf. Euro spot levels at 1.5720 failed to impact all commodities, with crude oil in the same boat, as the market concentrated on conciliatory statements out of Iran to push August WTI to US$141.64, off over US$3 p/barrel versus Thursday's close. Argentina led the advancers on the day in the debt space, mostly as a short-covering reaction to Saturday's approval by the lower house of the measure that introduces a sliding-scale tax on grain exporters. Reports from Buenos Aires indicated that the grain representatives weren't very soothed by the move of this measure through the legislative floor and could potentially return to other strike activities, depending on further ratification by the Senate, which now has the measure for consideration and may vote on the same by this Friday. The Discount of 2033 rose 1 ¼ points to 76, moving spread in by 13 bps. Peru looked firm on the day (though spreads widened minimally due to the lack of actual bond price movements), avoiding any influence from the risks embedded in an upcoming general strike this Wednesday, which now sports the backing of nationalist leader Ollanta Humala. The rise in the price of gasoline in Mexico by a higher than expected margin (6 cents higher per gallon for Magma starting July 01) appeared to unnerve the local markets, with some minor distrust on inflation also holding back the mid-to-long portions of the Mexican debt curve. Spreads from the belly to the far tip of this curve edged wider by 7 to 10 bps when calculated from posted bid prices versus Thursday's close in the US. The creep of Brazilian inflation expectations to the upside and the slowdown reported for Chilean growth in the month of May had only marginal impact on debt prices for these credits, with Brazil generally stronger on the day, which Chile slipped versus its US Treasury benchmark in spread terms. Peru's Sol outpaced all over regional currencies in the intra-day performance rankings, with locals concentrated on probable CB interest rate moves to the upside as the inspiring element (PEN 2.8470). The BRL played second fiddle in this regard, rising beyond 1.60 with gains of +.84% on the day. Equity markets were quite mixed, with the IGBC in Colombia an outlier in losing -1% on the day.

It usually is the case that the financial markets will prepare expectations for crucial data or policy announcements only to be shocked or disappointed by unforeseen results or developments. This was not the case last Thursday, as the key events of the day were nearly perfectly coincidental with market expectations. Only crude oil retained its wild card status, with closing prices establishing a new record mark at US$145.30 p/barrel. But this additional element of bullishness in the crude oil markets was totally independent of recent price-driving forces. The main events of the session stuck to the expectations playbook. The ECB hiked rates by ¼% to 4 ¼%, with Mr. Trichet leaving some ambiguous commentary on the table as far as the next move from this CB is concerned. On the US side, June's NFP report indicated a loss of -62K payrolls for the period, nearly a direct hit on the median forecasts, while the unemployment rate stood pat at 5.5%. Perhaps the only features of impact from the employment data were the revisions to NFP''s of both May and April to the downside, but this appeared overlooked by the markets for the most part. US Treasuries declared a holiday soon after the US figures were released, with the 10-year note quite stable at 3.987%. So it was up to US equities and the Dollar to produce a relevant reaction to the centerline numbers at hand. The DJIA preferred short-covering as a reaction to a less negative than feared jobs creation figure. Hence this index rose by +.65%. However, this gain wasn't representative of the cool reception felt for the loss of jobs in the broader market indices (S&P barely to the upside by +.11%). Most of the headlines thus went to the Dollar, as the greenback staged a strong comeback against the Euro. Spot prices dropped to 1.5696 by the close of trading in NY, a significant appreciation from the near 1.59 levels of Wednesday. Amid the steadier risk surroundings on the US side LATAM debt demonstrated a calm atmosphere, which differed starkly with the apprehension transmitted by regional equity indices. Short-covering prevailed in Argentine paper, with the Discount of 2033 up by 1 point to 75 ½ at the close. Venezuela used the impulse of crude oil to clear recent losses. Venezuela's 2027 Global climbed 1 ¼ points to 94 ½ as a consequence. Colombia continued to bask in the extremely positive light rendered by the liberation of former Presidential candidate Ingrid Betancourt. The 2017 Global was a gainer of 5/8's of a point, with bids finishing the holiday-shortened week at 109. The IGBC in Colombia stayed on its on track of regional independence, gaining nearly 2%, in clear contrast to the rest of the LATAM equity indices. In this regard, the region experienced drops of -1.50% or more for the major indices, with the sole exception of the IPC, which only slid by -.60%. Correlations amid the currency universe seemed to have come to an inflection point, at least on an intra-day basis. The COP continued to ride the way of security optimism, adding another +2.13% to recent appreciation, leaving the spot at 1742.10. The CLP, another normally negative correlated currency with the EUR/USD exchange rate, also hit the accelerator, moving higher by +1.48% to 509.20 on increasing expectations of forced CB monetary action to come.

The LATAM debt camp traded with a very minor positive tone in $ price terms at midpoint of the week, side-stepping another round of corporate anxiety in the US, alongside of the confirmation of the feared bear market arriving for the main US equity index. The external scenario was another replay of the tumbling USD/spiraling crude oil prices/diving US equity values trilogy that has grown into more of a constant of late. Anticipation of a ¼% rate hike by the ECB was enough to power the Euro to 1.5780 levels against the greenback, while crude played the Iran/Israel card again, though the market this time has some rather stern warnings from the Pentagon directed towards Israel to avoid any confrontation, which simply played into the war psychology drifting into this marketplace. The DJIA confirmed its 20% tumble for the highs established last October in losing another -1.46% on the day. The US equity decline, which was stronger in the NASDAQ at -2.3%, created another small flight-to-safety wave in US Treasuries. 10-year note yields dipped to 3.96%, which caused a most widening across LATAM, but the strong composition of negatives on the external front refrained from spilling into LATAM bond pricing. There was a completely different angle of action in LATAM and this held Colombia as its key protagonist. The rescue of Ingrid Betancourt was announced late in the day by the Colombian government and met with widespread applause on another victory over FARC terrorists. However, the IGBC (-.06%) didn't really have a go at the news and was perhaps limited in its reaction by the latest inflation data for June which climbed +.86%, leaving accumulated YTD CPI above the undistinguished level of +6%. But the COP certainly got early wind of the development, with the impulse capturing an impressive gain of +4.87% on the day that took the spot back to 1780.00. Of course the higher rates to come suggested by the inflationary figures were also fundamental to this outcome. Colombia's sovereign paper managed some moderate upside, with both the 2024 and the 2037 Globals elevating by about ¾ points, with spread compression of 2 bps. Chile was also in the news due to similar speculation on interest rates, though this wasn't data based. Rather, CB President de Gregorio indicated that he couldn't rule out further rate hikes to come, which elevated market expectations that rate action will again occur over the short-run. Argentine paper looked ready to fall to new lows early in the day, but the waiting process for the Congressional resolution on the grain tax levies continued uninterrupted without new developments, leaving the 2033 Discount at a still depressed 74 bid, but only off ¼ point on the day. Uruguay also made the underperformance camp due to the decline in its 2036 bond to 100.95 bid levels, which represented a loss of 1 ¼ points on the day. Underlying this fall lay the latest CPI data to come from Montevideo, which was another scorcher. Consumer prices in June rose by a very strong +1.28%, leaving YTD accumulated CPI at +5.44%. Along the remaining equity fronts in LATAM returns were less than desirable. Both the BOVESPA and the IGPA had losses of over 3%, while the IPC dropped by -1.85%, all victims of the rumblings of lower global growth to come and fears linked to crude oil prices. Outside of the COP, the currency front was mixed, with the CLP up by over +1.2% on the CB President statements on rates, while the BRL dropped by -.70% to 1.6085, reaffirming the difficulties the spot rate is having in moving through this level.

Elevated volatility in both US equity indices and crude oil prices served as the primary background for LATAM debt trading activities on Tuesday. Rife speculation and rumors related to the health of US and European investment banking concerns also played a major role in establishing a climate of decreased risk tolerance across asset classes in the early market hours. However, the focus on the pressing circumstances for the banking community was slowly overtaken by US economic data that again printed surprisingly above market forecasts. In yesterday's specific case, it was a return to expansionary terrain on the part of the manufacturing version of the ISM (50.2 for June) that overtook the financial worries and helped the US equity indices fight back to positive ground at the end of the day after having endured extreme bouts of losses and whipsaw action. But the ultimate recovery of US equities (DJIA +.28% on the day) and the toned down, but record, close in crude at levels slightly inside of US$141 p/barrel (after another attempt to ride to the sky failed upwards of US$143 p/barrel) failed to evacuate the pressure for the sovereign debt class. A back-up by US 10-year Treasuries to yields of 4.00%, about 7 bps higher than Monday's close, also added to the downside bias, with the inflation component of the manufacturing ISM (29-year high) also a likely culprit of this modification. In the end, the entire LATAM debt category suffered pullbacks in bond pricing, with widening also prevalent across the board. Oil credits outperformed for yet another day, though they weren't foreign to intra-day losses. Venezuela's 2027 Global was particularly weak in this sense, managing a low 92 ½ bid at the end of the day, which represented a loss of 1 ½ points on this side of the market. Argentina was a major protagonist due to the lowly price levels reached by its benchmark credits. The 2033 Discount hit a new historical low at 74 ¼ bid, off US$2 on the day. Local sentiment soured due to the flow-through of global growth anxiety and this added to the momentum of sellers looking to short this credit as a hedge to exposure in the broader LATAM category. Brazil's 2034 Global returned to critical support in the 123 area upon losing 1 1/8 points on the day. News that inflation expectations captured in the Banxico survey had gapped higher but Mexico on the defensive. The 2031 benchmark withdrew by nearly 2 ½ points on the bid side to 124. With plenty of the region's leaders busy at the MercoSur conference in Argentina, news was somewhat thin. Peru's Finance Minister Luis Carranza seemed to be on the outs as per statements made by President Alan Garcia, those this failed to impact this nation's sovereign instruments, as did the extension of the minders strike. Regional equity markets were divided in their reaction to the rising risk aversion sentiment coming from the developed markets. Both the BOVESPA (-2.49%) and the IGRA in Chile (-2.38%) were the equity indices with the most evident sings of external jitters contagion. On the currency front, the COP posted a large reversal (1871.05 + 2.14%), which was both attributed to short-covering and the quieting political front.

The risk aversion turbulence emanating from the US financial markets appeared to subside as weekly trading activities re-opened yesterday, which helped LATAM to a stable showing among the major debt credits. Crude oil remained the major protagonist on the international stage, as NYMEX futures again produced new historical records at levels beyond US$143 p/barrel, before sinking under the weight of profit-taking activities (US$140.30 p/barrel levels were trading in late NY hours). But the impact of new highs for oil appeared well contained, as the Chicago PMI for June in the US, despite its continued levels of contraction (49.6 in June), eased some of the lingering anxiety related to a receding level of economic growth in the US. The off-set of economic data versus higher oil allowed for US equities to re-gain some footing. Hence, the DJIA was able to register near unchanged levels on the day, denying the risk aversion trade another day in the sun. Both the USD (1.5755 vs Euro) and US Treasuries (10-year note holding at 3.977%) were in holding patterns ahead of the critical US data to come later in the week, with this also serving to quite much of the speculation on hand related to global credit markets. Regionally inflation concerns were alive and well. Brazil's weekly Focus survey elevated 2008 IPCA projections to +6.30% from the prior +6.09%, the fourteenth weekly rise. Social unrest also continued unaltered. In Peru miners initiated a general strike of undefined length, while in Argentina the government published a resolution seeking US$649MM from grain exporters for activities carried out in 2007 and that didn't pay the increased levies determined in November of last year. In Colombia reports surfaced that the government was busying assembling a referendum proposition on the 2006 election that would be sent to Congress, leaving on the table the current confrontation between the Executive and the Judiciary branches. Re-pricing in the debt realm was limited to Ecuador and Venezuela, which both absorbed some of the early positives conveyed by the new record price in oil futures. Ecuador's 2015 Global climbed ¾ points on the bid side to 103, while the Venezuelan 2027 bond rose 1 point to 94 bid. Colombia was on holiday but this didn't stop the currency markets from forcing the COP to 1912, an intra-day slide of -.74%. The BRL also took a in reversal, with the spot above 1.60 at the end of the afternoon (1.6036, off -.6%), while the Bovespa used the hiatus in external volatility to rebound by +1.00%.

The US financial markets, and their steady dose of nervousness, remained the primary influence on the LATAM debt class as the week drew to a close last Friday. It was crude oil that held the markets in check this time around, as this commodity rallied again to establish new historical highs above US$142 p/barrel, before tailing off to a close at US$140.54. The counterpart of hefty oil prices, a weakened USD, was also very much in evidence during the session, as the greenback continued to backpedal against the Euro (1.5794). In difference to the heavy pull of equities during Thursday's wipeout, it was only the DJIA that remained subject to downside of any significance, with this index lower by nearly 1% on the day. However, this was not representative of the broader US equity index, as the S&P lost only -.37%. The lack of continued manifest equity risk-aversion served to arrest some of the negative momentum that had seeped into the LATAM debt class during the prior trading session. LATAM was nonetheless subjected to another retraction in US Treasury rates, where 10-year paper dipped to 3.969% yields, still denoting unsettled risk expectations, which forced widening along the front of sovereign paper. Aside from the externalities, there were two defined protagonists in the LATAM sphere. Colombia was top-heavy in headlines, with the skew decidedly negative. President Uribe indicated a desire to call a referendum on the 2006 Presidential elections as a response to the latest questions of legitimacy surrounding the Constitutional amendments that allowed his re-election. The suggestion of a confirmatory vote on this election opened the doors to calls of veiled re-election and authoritarianism on the part of the very popular Colombian President, all of which injected a climate of confrontation along domestic political lines. On the economic front, reports that growth had waned to +4.1% for the 1Q of 2008 versus the similar period in 2007 was met with disappointment, in particular once the negative seasonally adjusted q/q figure was taken into account. The fresh doubts on this credit only pervaded by currency arena with immediacy, as the COP dropped -1.50% against the USD to 1898.00. Curiously, both debt paper (where bids stood unchanged for the 2024 Global at 116), and the domestic equity market failed to ingest any jitters from the unfolding political uncertainty. Uruguay was the other major noise-maker in LATAM. The tender for USD/Euro-denominated bonds failed to obtain significant interest, with the additional issuance of 2036 USD sovereign paper to come a small US$124MM. Most of the USD paper tendered belonged to the 2015 issuance, which meant that this offering turned into a near outright duration extension exercise between these two assets. Economic readings were unkind to Uruguay. Wholesale prices rose +2.52% for the month of June, with the 12-month accumulation reaching a spectacular +23.10%. $ pricing for the 2036 credit slipped by ½ point on the bid side to 102 on the day. Peru was the other credit suffering pressure in the debt realm. Long-dated paper all feel by over 1 ¼ points from the 2025 to the 2037 maturities, with a fall of -8.8 in May's fiscal surplus calculations a likely justification for the negative adjustment. Domestic equities shunned the jittery tone of the DJIA in establishing intra-day price patterns, preferring to accumulate moderate bounces instead. The BRL traded inside of 1.6000 against the USD in reversing the prior day's anxiety, while the CLP remained glued to the negatives created by spiraling crude oil prices for this nation. The spot versus the USD declined another -1.15% to 521.20.

The justifications for yesterday's mayhem in US financial markets were thought to be located in the expanding quicksand surrounding US financial institutions on the funding front and the increasing fatal game of merry-go-downgrades that continues to emanate from the desks of the leading US investment banking institutions. Unchanged, elevated weekly jobless claims (384K) and growing fears about the survival of the US auto and airline industries also filled in some of the loopholes in setting the stage for yesterday's widespread equity implosion. However, in our view, all these factors were ancillary at best. It was the Fed and it's increasing lack of credibility on inflation-fighting that should score yesterday's bloodbath in its book of successes. The lack of USDollar support coming from this CB was clear, as the greenback dove against the Euro since early trading hours, registering 1.5750 levels in late NY trading hours. The USDollar depreciation playbook was then easy to follow for the major markets. Crude oil was a primary actor and highly visible in this regard. August futures on NYMEX hit US$140 p/barrel before tailing off. Trades were exchanging hands at US$138.74 in late NY hours, still nearly US$5 p/barrel above Wednesday's levels. Statements from OPEC warning of US$150 p/barrel oil due to the USD weakness and Libya threats of oil export interruptions due to a legal spat only worsened the fears in this market. The impact of another record in crude oil and further inflation risk to come is what did in the US equity players in our interpretation. The DJIA cratered by -3.0%, while the S&P and the NASDAQ moved in near negative unison. The repeated headline in this sense was that the DJIA had just established its worse monthly reading for June (-9.40% MTD return) since the Great Depression (only outdone by June 1930 at -17.72%). LATAM, unfortunately, was rapidly dragged into the wake turbulence of the US equity storm. With US Treasuries thoroughly involved in a flight-to-quality run (10-year yield dipped to 4.03%, lower by 7 bps), LATAM suffered strong widening, aside from pressure on bond prices due to the changing climate for riskier assets. Losses across the category were widespread, but high-Beta returned to the undesirable spot of group leader. Argentina's Discount bonds hit a new bid low for the cycle at 75 ½, lower by 2 1/8 points on the day. This came despite growing opposition in Argentina's Congress to ratifying the unpopular tax levies on grains producers pushed forward by the Fernandez administration. Colombia revived its positively correlated directionality to US equity pricing, with debt credits in this sovereign widely marked lower. The 2024 Global was a standout in holding only 116 bids, a full 2 points lower from Wednesday's close. Reports that President Uribe was proposing a decrease in the fiscal deficit for both 2008 and 2009 failed to impact debt bond liquidators. Venezuela's Global of 2027 fell back to 92 ½ bids, notwithstanding the new record in oil prices. News of a bomb threat at the US Embassy in Caracas and also of expressed interest by Russian Premier Vladimir Putin in a visit by President Chavez put a negative twist on Venezuela's external policy front for debt investors. Regional equity market results were less dreadful than expected in the context of the US meltdown. The BOVESPA led the way, diving by -2.89%, to complete a June decline of nearly -12%, easily outpacing the lead of the DJIA. Surprisingly, the rest of the major regional indices were lower by -1.45% (IGBC in Colombia) or less, signalling a constrained pass-through of US anxiety. Currencies broke with the usual pace of appreciation amid USD weakness and joined the ranks of jittery financial markets. The Colombian Peso was blasted lower, with the spot rate against the greenback losing a spectacular -5.26% to 1870.00. The loss of -1.32% registered in the USD/CLP rate (515.25) was minimal by contrast.

The week's core financial markets event coming from the FOMC in the US was anti-climatic, as Fed funds rates were held steady at 2.00%, while the policy guidance offered by the Fed repeating warnings on inflation, while also anticipating that these risks would recede over time. The unchanged rate decision came on the heels of another day of unimpressive economic and housing data on the US side. New home sales for May were lower by 2.5% m/m, with inventories again climbing to 10.9 months of surplus. Both the mean and the median prices sold dipped, which dissipated the minor positives extracted in prior months for these figures. Durable goods for May were unchanged and -.9% when transportation was removed, uninspiring to say the least, but some sang the praises of a less-than-dramatic fall of -.8% in non-defense capital goods orders ex-aircraft. Reactions in US markets were somewhat within our expectations. Equities posted a knee-jerk rally, only to lose steam amid short-falls in profits from technological bellwethers and additional uncertainty about inflationary pressure in the US in general. US 10-year paper was peculiar, as it ignored the intended core of the Fed message about elevated inflation, preferring to sit at 4.10% yields on the expectation of prolonged Fed inactivity to come. The volatile part of the equation came as we had been expecting. The USDollar tumbled against the Euro to 1.5670 by early Tokyo trading hours, while crude oil prices used the greenback dip to recover losses generated by an unforeseen rise in US weekly inventory data. August crude traded at US$134.50 during the Globex session, near unchanged. News in the LATAM region took a back seat to US news flow, but still managed to entertain as it was mostly related to the budding inflation topic. Colombia unveiled a near US$1B cut in 2008 government expenditures to curtail demand and further reduce inflationary pressure. Debt paper from this sovereign appeared to ease slightly with spreads out by 3 to 4 bps. Of course the domestic reaction was more dramatic. The COP dove by -1.76% to 1776.50, compressing YTD gains below 12% after some time. Ecuador's new President of the Constituent Assembly, Fernando Cordero, promised a timely delivery of the new Constitution, reviving uneasiness about the reach of President Correa in pushing through populist measures. The Central Banks of Brazil and Mexico had cautionary pronouncements about 2008 inflation, with the former upping its expectations to 6.0%, while the latter simply indicated a rise to come in the yearly target. Brazilian debt weakened for yet another day, with price losses tallying 3/8's of a point on average and spreads wider by 3 to 4 bps. Domestic Brazilian markets were tolerant of the hike in inflation expectations, with the side-step allowing the BOVESPA to continue a climb by +2.63%, while the BRL hit a new cycle high in breaking above the 1.6000 barrier to 1.5900.

Slightly lower bond prices and wider spreads in the range of 8 bps was the general outline for LATAM external bond performance yesterday, a session marked again by rising concerns on the US economic/credit conundrum. Much as anticipated, US housing markets held the markets captive through another negative monthly print in the Case/Schiller home price figures for April, with month-to-month pricing in the top 20 metro areas lower by -1.4%, while the y/y comparison weakened to -15.4%. Consumer confidence figures from the US added to the growth questions on the table, as the reading for June plunged to new lows, while 1-year inflation expectations remained at a very lofty +7.7% level. US Treasury markets were the most sensitive to the data on an intra-day basis, as a 6 bps compression in the US 10-year note (4.10% yield) was unleashed by the weakened housing/consumer figures. US equities preferred to drift lower (DJIA -.29%, S&P -.28%) and play a waiting game on the Fed, with risk aversion pass-through minimizing for LATAM. The USD (1.5565 Euro) weakened somewhat on the back-and-forth blasts of economic negatives between the US and Europe. Crude oil remained skewed towards higher prices, all the fault of additional rumours related to impending attacks on Iran by Israel, with the front August month holding in the vicinity of US$137 p/barrel. Former Fed Chair Alan Greenspan again flustered investors in affirming that the US was on the brink of a recession, with odds above 50%, contrary to some recent statements from this figure leaning in the opposite direction. It was, ultimately, the sensation that the US economy has a lot more uphill battles ahead than confessed by US policymakers that drove a negative intra-day reaction from the LATAM debt universe. Regional news failed to provide any bolstering arguments to the intra-day price shifts. Uruguay launched a two-tier exchange of bonds, with the international portion allowing for tendering of USD credits dated up to 2015 in exchange for 2036 USD paper. At the same time ANCAP in Uruguay announced the detection of natural gas on this nation's continental shelf, a timely and interesting find if proven commercially viable. Panama checked in with another whopping +9.48% y/y growth rate for the month of April, reaffirming its status in the defensive low-Beta's as one of our favourites. Ecuador and Colombia returned to the confrontational tone on the diplomacy side, with the former threatening trade sanctions. The long-end of Brazil underperformed. The 2034 Global now sports a lowly 124 ½ bid, off 1 1/8 on the day. Both Colombia and Peru looked shaky in long-dated paper, with losses of 1 point for both the 2037 Globals of both sovereigns. Equity markets across the southern continent were soft, with the MERVAL and IGRA losing around 1% as the highlights. The COP in Colombia continued on its corrective downswing to 1748, off -1.25%, while the CLP backed to 504.20 on the suggestions of a more challenging environment ahead for the US.

LATAM did very little on the side of spreads yesterday, simply tagging along with drifting US Treasuries due to the holding pattern usually in effect before Fed rate decisions. The heavily publicized weekend meeting of oil producers & consumers in Jeddah produced more verbal compromise than real commitment to the current boom in crude oil prices. Promises by the Saudis to increase production by 200K bpd and to elevate capacity into 2010 were deemed minute resolve by the marketplace, which clearly shifted into short-covering mode as trading resumed. Hence, crude constituted one of the few features of the day in climbing above US$137 p/barrel levels during the late hours Globex session. USD weakness wasn't one of the culprits for the oil recovery, as the greenback made some headway against the Euro (1.5518 in late NY hours) courtesy of weakened German economic data. US equities were flat, with the exception of the technological indices, though this masked a continued wall of worry related to financial institutions, which defined the carryover sentiment from last week's market. Parting with the flat US Treasury realm, Brazilian debt instruments softened, with bids withdrawing more noticeably in the belly of the curve, where the 2025 credit was only able to sustain 127 ¼ bids, off over 1 point on the day. The upswing in Brazilian inflation expectations appeared to put a damper on sentiment in this arena. Currencies were the most volatile of the LATAM financial markets. A stronger USD and CB intervention forced both the CLP (-1.37%) and the PEN (-1.06%) into the depreciation column. However, it was the spillover for the unchanged CB decision on rates of last Friday, plus the promise of US$20MM in purchases on the local currency market a day, that sent the COP spinning. This currency accumulated the largest depreciation by far in the region on a daily basis, losing -3.21% to 1726.50.

There was more risk aversion in the air of global financial markets as the trading week drew to a close last Friday. The point of origin for the new case of nerves was none other than the US equity markets, where both the DJIA and the S&P sunk by about -1.8% each, while the NASDAQ posted stronger losses of -2.27%. If it wasn't enough that nearly all US investment banking firms have either admitted, or been rumored to be close to additional warnings on weak earnings streams to come, the downgrade of bond-insurer MBIA by Moody's to A2 status from the prior AAA sent another ripple through the financial firms on the potential counter-party risks linked to this entity. This was the primary source of discontent among entity market participants. However, there were further potholes in the intra-day path of US markets, which filtered back into the LATAM realm. Crude oil suffered a rapid erasure of the leveling price effects embedded in the hike in domestic Chinese fuel prices, courtesy of news reports describing Israeli military exercises in preparation for a possible bombing of Iranian nuclear sites. August, the new front month for the oil futures contract, rose sharply by over US$2 p/barrel to close at US$134.71. Fluctuating noise levels on a top-tier US investment banking firm and its potential for more capital on the coattails of the MBIA downgrade also added to the gloom at hand. US Treasuries were visibly pumped by anxiety related to the fate of US financials, with the 10-year note dropping its yields to 4.16%. The implications that the FED might have less leeway than anticipated on starting to take back some of the monetary stimulus also placed the USDollar under pressure. Against the Euro, the greenback slid back to the 1.5600 figure. LATAM was not without its own significant developments. The Central Bank interest rate focus ended with a split decision. On one hand, Banxico in Mexico surprised more than a few with a ¼% pre-emptive inflation-fighting hike to 7.75%. On the other end of the spectrum, Colombia let down more than a few, as the CB left interest rates unchanged at 9 ¾% after a policy meeting that appeared to last extensive hours. Reports out of Quito that the Constituent Assembly would likely angle measures to allow for Presidential re-election simply exacerbated the growing concerns related to the growing role President Correa would obtain in Ecuador's economy if the plesbicite to ratify the new Constitution is ultimately approved. Ecuador led the way lower in the LATAM debt markets on the mildly changing, but negative sentiment toward politics in Quito. The 2015 Global dipped by 2 ½ points on the bid side to close at 103. Argentina's Par bond of 2038 underwent a catch-up move, dropping to 34 ¼ bids, a loss of ¾ points, as the uncertainty of the conflict between grain producers and the government kept short-sellers in control. Uruguay suffered another bout of softening, as the 2033 credit dropped to 106, off 1 ½ points on the day. Pass-through risk version was mostly felt in the BOVESPA, which sunk by -2.97%, while the IPC and the IGRA were off a more modest -1%. These two latter countries produced the extremes in results on the currency front. The MXN rose to new cycle highs at 10.2780 on the back of the CB rate hike, while the CLP reversed by -.65% to 494.50 versus the USD on absorption on the negative climate on external markets (oil, risk, etc.).

Crude oil was a casualty of directives brought forward by the National Development and Reform Commission in China yesterday, as this entity surprisingly dictated a rise effective today of 17% in gasoline prices, 18% in diesel prices and 25% in jet fuel prices on the mainland. Flow-through into the NYMEX pits was immediate, with the front July contract taking a sharp tumble (trading at US$131.79 in late NY hours, off nearly US$ 5 p/barrel from Wednesdays close) on the assumed decline in Chinese consumption to come after this measure. The positive breath injected into the marketplace by this event was enough to conquer the negatives broadcast by the June Philly Fed survey, which slid again in its headline reading (-17.1 from the prior -15.6), though it was actually the upswing in the prices paid component (69.3 in June, the highest level in 27 years, from the prior 53.8) that caused increased concern. Beyond the influence of crude oil from the external front, US equities, Treasuries and the USDollar provided minimal input into the price-driving equation for LATAM, as each of these markets stuck to rangebound surroundings. In the LATAM hemisphere, developments were centered on Brazil. Colombia and Venezuela, though these had a minimal degrees of pass-through into debt pricing. Brazilian Deputy Treasury Secretary Paulo Valle indicated in the course of an interview that Brazil could re-open the 2037 USD-Global in an amount of US$500MM to accommodate the demand created by the upgrade to investment-grade for this nation. Moody's, in what we view as a catch-up move, upgraded Colombia's foreign-currency bond rating to Ba1 from the prior Ba2, matching the current level fo ratings at Fitch and S&P. President Chavez in Venezuela flexed his oil muscles late in the day, threatening to curtail exports to European countries intent on imposing new laws governing illegal immigration. The Venezuelan government also caught additional press coverage due to the new decree that determines the nationalization terms of the cement companies. The decree establishes a period of 60 days for the current shareholders to reach terms with the government on future participation, with the state having at least a 60% rate of participation in any new entity. Transfer of ownership must occur by the last day of 2008. On the side of sovereign bond performance, both Ecuador and Venezuela suffered setbacks imposed by the bashing taken by crude oil. Ecuador's Global of 2030 was bid at 98, off 1 ¾ points on the day, as comments offered by President Correa on expectations of signing re-structured oil deals by the end of the month also weighed on sentiment. Venezuela's 2027 Global held a 94 1/8 bid at the end of the day, off by 1 ¼ points. In the domestic markets, Colombia was a prime protagonist. Jitters related to today's CB rate decision pressured the IGBC to a -3.33% loss, though the COP managed to walk away with a small -.54% depreciation. USD demand related to maturing forward contracts put the PEN at the bottom of the currency performance map with a loss of -1.21% to 2.9170.