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Back in the fold?

Edited by Brian Caplen

News from Algeria tends to focus on the political violence and economic sabotage caused by Islamic opposition groups. Recently, however, the country's high-yielding debt has also been attracting attention. Following the long-awaited conclusion of a rescheduling agreement with the London Club of commercial bank creditors in August, Algeria has become a beneficiary of the increasing thirst for exotic risk.

Debt traders see the London Club accord as a vote of confidence by creditors and it has triggered interest in Algerian paper. "The deal has come at a good time for Algeria, coinciding with a time when investors are looking to diversify their risk," says Bradley Wickens, an analyst at Banque Indosuez in London. "We've seen a huge jump in liquidity for Tranche A [the most actively traded paper]. Now Euro brokers always have a price on the screen, which wasn't the case two months ago. The bid/offer spread has tightened from 200 basis points to 75bp."

Says Redwan Merouani, a director of UBAF Asset Trading in Paris: "Emerging market debt has moved up sharply since March. When more liquid instruments become too expensive, there is always a need for new frontiers.