May 15, 2018 / 8:58 PM / 10 months ago

EMERGING MARKETS-LatAm currencies extend selloff as U.S. bond yields spike

    By Bruno Federowski
    BRASILIA, May 15 (Reuters) - Latin American currencies
extended their selloff on Tuesday as data showing an increase in
retail sales bumped up U.S. benchmark Treasury yields to a near
seven-year high, curbing demand for higher-yielding but riskier
emerging market assets.
    The U.S. benchmark 10-year Treasury note yield
reached 3.095 percent, blowing through the key psychological
level of 3 percent it hit in late April for the first time in
four years.
    The move came in the wake of a 0.3 percent rise in U.S.
retail sales last month, which although small suggested consumer
spending is on track to accelerate after slowing sharply in the
first quarter.
    Along with accelerating inflation and a widening fiscal
deficit, that increased bets that the Federal Reserve might hike
U.S. interest rates by more than expected, something that has
driven a global emerging market selloff in recent weeks.
    Argentina's peso, which has been by far the region's biggest
loser so far this year, snapped its losing streak and ended
higher after the country's central bank offered to sell up to $5
billion in a bid to stop the currency's slide.
    Argentina requested a "high access stand-by arrangement"
from the International Monetary Fund last week after the peso
depreciated rapidly, prompting the central bank to start selling
reserves and hike interest rates to 40 percent.
    The Brazilian real weakened to hit its lowest in two
years on Tuesday, while the Mexican peso touched a
one-year low. 
    Both currencies were also pressured by local issues, with
Brazil headed toward its hardest-to-predict elections in decades
and Mexico struggling to close a deal with the United States and
Canada to renew the North American Free Trade Agreement.

    Mexico's IPC stock index closed down over 0.5
    Key Latin American stock indexes at 2020 GMT:
 Stock indexes                     Latest      Daily   YTD pct
                                                 pct    change
 MSCI Emerging Markets              1,149.40   -1.67       0.9
 MSCI LatAm                         2,811.23   -1.12      0.53
 Brazil Bovespa                    85,130.14   -0.12     11.42
 Mexico IPC                        46,258.96   -0.56     -6.27
 Chile IPSA                         5,718.58     0.4      2.77
 Chile IGPA                        28,897.06     0.4      3.27
 Argentina MerVal                  30,732.60    0.96      2.22
 Colombia IGBC                     12,609.65       2     10.90
 Venezuela IBC                     20,570.70    3.23   1528.54

 (Reporting by Bruno Federowski, editing by G Crosse)
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