MOHAMED EL-ERIAN, the chief emerging-market bond investor at
Pimco in California, likes to tell the story of a trip to Asia
at the beginning of 2002. A large investor there was dipping
its toes into El-Erian's market. Brazil was doing what it tries
to do every January - issuing a 10-year bond. The Asian
investor put in an order, received an allocation, and watched
as the new bond immediately fell off a cliff, dropping three
points in one day.
El-Erian is the world's biggest buyer of emerging market
The fund manager reported this development red-facedly to
his superior, the shell-shocked company sold the bond taking a
large hit, and an important investor was lost to the asset
class for the foreseeable future.
El-Erian was furious: this kind of deal gave emerging-market
debt a bad name and kept large numbers of investors on the
sidelines. The asset class has...