Ecuador's bonds gained the most in more than a week after Economy Minister Fausto Ortiz said the government was considering exchanging debt for cheaper securities, easing concern the country may default.

President Rafael Correa roiled markets last year when he threatened to default on Ecuador's $10 billion debt to free up funds for social spending. The government may look to exchange around $500 million of debt in the first six months of 2008, Ortiz said in an interview during a meeting of the Organization of Petroleum Exporting Countries (OPEC) in Riyadh, Saudi Arabia. Ecuador hasn't decided which bond it will swap, Ortiz said.
“The recent rhetoric has been more market friendly,” said Edwin Gutierrez, who helps manage $5 billion of emerging-market debt at Aberdeen Asset Management Plc in London. “That they are talking about some sort of exchange for cheaper debt is positive.”
The yield on the country's benchmark 10 percent bonds maturing in 2030 fell 12 basis points, or 0.12 percentage point, to 10.58 percent at 4:07 p.m., according to JPMorgan Chase & Co. The bond's price, which moves inversely to the yield, rose 1 cent on the dollar, the biggest gain since Nov. 8, to 95 cents. Ecuador also has bonds that mature in 2012 and 2015.
Economic concerns
Emerging-market bonds fell Friday concern about growth in the U.S. economy, the biggest buyer of developing nations' exports. “The slump in global credit markets is likely to force banks, brokerages and hedge funds to cut lending by $2 trillion, triggering the risk of a substantial recession in the U.S., Goldman Sachs Group Inc. said Friday.
The average spread on emerging-market debt today widened 6 basis points to 2.33 percentage points, according to JPMorgan. The yield difference is the widest since Sept. 12.
The risk of owning Brazilian bonds, the most widely held emerging-market securities, was unchanged today, according to data from Lehman Brothers Holdings Inc. Five-year credit-default swaps based on the country's debt held at 104 basis points. That means it costs $104,000 to protect $10 million of the country's debt from default.
(Source: Bloomberg)