Bloomberg - George1

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LAC Debt Group:

Secondary Market Development Workshop

Market InfrastructureGeorge J. Holdefehr, III

[email protected]

Director ± Latin American Liquidity and Product DevelopmentBloomberg do Brasil

Washington DC

27 October 2006

Collaboration by Beth Kostick, Latam Fixed Income Derivatives Product Manager

[email protected]



Introduction

Bloomberg has been active in Latin America for 12 years.

Today we offer live trading platforms for local debt in both Mexico andBrasil.

We offer extensive pricing for most local debt in most Latin AmericanMarkets.

Of the 2166 different types of bonds offered by Latin AmericanGovernments we offer price/yield calculations on 1670 of them, or 77% of all government debt.

Today¶s presentation is the story of how we got to this point and what weneed in order to move forward.



- Let¶s begin our discussion by

looking at what is

ultimately possible.

- The complete

transparency and

efficiency of a bond

market.

- The US Treasury

Market for example.

BBT GO

Bloomberg Bondtrader f or U.S.

Treasuries



- Similar advances can

be seen in the market

in Latin American

Global Bonds.

- Bonds like the Brazil

40, the Colombian 17

and the Peruvian 15

are all examples of

benchmark bonds with

high transparency and

liquidity.

BBT LATAMGO

Bloomberg Bondtrader f or Latin

American Global Bonds



- With settlement and

price transparency

established bonds like

the Brazil 40 can beanalyzed using

relative value

measures like the

Option Adjusted

Spread and the Z-Spread.

BQ GO

Price Transparency and the Brazil 40



- Some Brazilianlocal debt has

achieved enough

settlement and

price transparency

to allow for a local

multi-dealer trading

platform

- Local Brazilian

debt is traded liveon Bloomberg now.

BRAZ GO

Bloomberg·s Trading Platf orm f or

Local Brazilian Debt



- Accessible and

transparent

regulators and

exchanges are

critical to efficient

markets.

BGVT GO

Brazilian Tesouro Nacional & BM&F

0/850



- As in the case of

Mexico, this multi-

dealer platformallows traders to

execute with one or

more

counterparties both

via RFQ or Anonymously.

MEXI GO


Mexican MBonos and Cetes



Transparency - Liquidity Continuum

Time

Primary Markets

Established

Settlement Transparency

Established

Price Transparency

Established

Relative Value Transparency

Established

Transparency

Liquidity

Low Trading Volume,

High Bid/Ask Spreads,

Trading Profits from Spreads

Increasing Trading Volume,

Tighter Bid/Ask Spreads,

Trading Profits Increasingly from

Volume

Predictable Trading Volume,

Stable Bid/Ask Spreads,

Trading Profits from Market Timin

Investment Analysis and Volume



- Well defined,widely

disseminated,

predictable and well

reported primary

auctions are thefirst step to a

transparent and

liquid marketplace.

AUCS GO

Primary Auction Systems on

Bloomberg



-Creating a widely

acceptable trade ticketis difficult, all partiesmust agree to themonies to beexchanged.

- Unique local practices

complicate thesettlement process andlimit the pool of potentialinvestors.

- Examples include:

Chile¶s debt that tradesvia a dirty price.

Colombia¶s TES andthe unique treatment of the last coupon.

Brazil¶s 252 daycount.

BXT GO

A Trade Ticket f or the Brazilian NTNB

² Settlement Transparency



- Unique yield analysis

pages must be createdto allow for localconventions. Thisprocess is both timeconsuming and costly.

- A screen built to local

specifications does notinsure regional or globalunderstanding of thevaluation of a bond.

- While most inflationlinked debt in the region

uses ³inflationcurrencies´ (Chile UF, Argie CER, Peru VAC,Mexico UDI) Braziladjusts the principal of abond by a daily factor.

BXT GO

Yield Analysis f or the Brazilian NTNB

² Settlement Transparency



-With Settlementtransparency

established and

agreed upon, price

transparency

begins to emerge.

- In this case both

tradeble and

indicative pricing

are shown.

- Intra-day pricing is

next«

ALLQ GO

Price Transparency is Progressing f or

Brazilian Inflation Linked Debt



- Intra-day pricingindicates increasing

transparency and

liquidity.

- With enough

intra-day pricing the

next step is a

trading platform«

GIP3 GO

Intraday Pricing ² Brasilian NTN-B



- The trading platformfor Brazil is an example

of the levels of liquidity

and transparency that

can be achieved when

market players worktogether.

-Local Brazilian debt is

traded live on

Bloomberg now.

- Financial products are

traded electronically

around the world«.

BRAZ GO


Local Brazilian Debt



ET GO

Bloomberg·s Electronic Trading

Platf orms by Market Sector



- Bloomberg isprepared to partner

with the market to

build electronic

trading platforms

throughout Latin America.

ET GO

GOVERNMENTS GO

Government Debt Trading Platf orms



-The use of OMSfurther increases

transparency in

markets, and the

most advanced

markets have fullSTP from

Primary,

Secondary,

Settlement,

Custodial to

Reporting.

LTP OMS GO

Data f rom Electronic Trading

Platf orms can Feed Directly into OMS



Conclusions

Market transparency starts with clear well defined, predictable, publiclydisseminated and reported primary auctions.

Transparency and liquidity both benefit from price/ yield calculations that are welldocumented, easy to understand and widely accepted.

Government and regulatory policies that remove barriers to both local andinternational trading and investing increase both liquidity and transparency.

Efficient capital markets allow monies to flow to investors and governments thusfacilitating capital investment which opens the doors for economic development.

With a good part of the ground work already in place throughout Latin America,Bloomberg looks forward to assisting in this mission of making our debt moretransparent, liquid, and attractive to ultimately bring about increased andsustainable growth in the region.



For 24 hour global customer support call +1 212 318 2000, +44 20 7330 7500,

+65 6212 1000, +81 3 3201 8900 or press the HELP key twice on the

BLOOMBERG PROFESSIONAL ® service.

2005 Bloomberg L.P. All rights reserved.

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