Emerging market dollar-pay debt spreads tightened marginally this week as risk markets in general performed well on the back of some better-than-expected global data releases. The US dollar-pay JP Morgan EMBI Global index returned 12.53% (year-to-date through September 2nd, 2010).

In Brazil, the Central Bank kept its benchmark interest rate (Selic) unchanged at 10.75%, in a unanimous decision by policy committee members. In a statement following the announcement they indicated that the current level of the Selic rate is sufficient to keep inflation in line with the targeted trajectory. Local rates were higher and currency stronger following the announcement.

In China, the headline Purchasing Managers Index (PMI) rose by 0.5% to 51.7% for August, a larger-than- expected increase. New orders for metal products were one of the main contributors to the rise. Risk appetite increased following the announcement as investors saw this as a sign that the global economic recovery is still intact.