Emerging debt prices surged on Friday on the back of a strong US Treasury rally, triggered by a surprisingly soft US jobs report which further eased fears of a series of abrupt anti-inflationary interest rate hikes.
Total returns rose 1.20 percent on the J.P. Morgan Emerging Market Bond Plus, while spreads narrowed by 11 basis points.
Brazil's global 40, seen as the benchmark for the asset class, led the way, soaring 2.687 points to bid 96.750 at a yield of 11.374 percent.
The benchmark 10-year Treasury note jumped nearly a point on Friday, dragging its yield down to 4.46 percent from 4.57 percent late on Thursday.
US non-farm payrolls rose 112,000 in June when analysts had looked for a gain of 250,000.
Coming two days after a 25 basis point Federal Reserve interest rate hike in line with market expectations, the data further soothed fears that an overheating economy would inspire sharp Fed hikes harmful to emerging market bond prices.
Emerging market debt prices hinge on Fed interest rate changes and subsequent changes in safe-haven US Treasury yields, which dictate how much extra value investors get for betting their cash on riskier debt.
Friday's job figure led some to suggest the Fed could even leave rates unchanged at its next policy meeting in August.
"The expectations of a rate hike in August have receded, so that has provided a very favourable backdrop for emerging markets," said Siobhan Manning, Latin American debt strategist at Caboto, the Italian investment bank.
Emerging market bond prices fell sharply in April and May, when a market long accustomed to low interest rates first priced in concerns about a possible rate hike frenzy.
"The market went from thinking that US rates would stay low forever to thinking that they were going to climb a lot higher, fast," said Christian Stracke, lead emerging markets analyst at CreditSights, a Wall Street research firm.
"Now people are beginning to think the Fed really could increase rates at a measured pace," he said. "That's bringing out the buyers in emerging markets because ample liquidity in the US is going to support risky assets.
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