Amid rising demand for Latin American bonds, J.P. Morgan & Co. Inc and Citigroup Inc.'s Salomon Smith Barney unit launched a $1 billion, 20-year bond for Argentina on Tuesday.

The issue followed a $1.5 billion, 10-year bond that Morgan and Chase Manhattan Corp. launched Friday amid rising demand for higher-yielding emerging-market bonds.

Bankers said Tuesday that the fast pace of issuance this year indicates a surge in business in emerging-market economies in Latin America, Asia, and Eastern Europe.

Morgan, Chase, Citigroup, and FleetBoston Financial Corp. as well as leading European and Canadian banks such as Bank of Nova Scotia, Deutsche Bank, and UBS, have major stakes in emerging markets, where profits tend to be far higher than in North America and Europe.

The drawback is higher volatility.

This week the Washington-based Institute of International Bankers, which represents 315 U.S. and foreign banks, predicted that net capital flows to leading emerging-market economies will jump this year as their average economic growth climbs to 4.7%, from 2.9% last year.

The institute forecasts that capital flows will rise 27% this year, to $190 billion, from about $150 billion in both 1999 and 1998.

Of that amount, private capital flows to Latin America will rise 25%, to $85 billion, with Brazil one of the major beneficiaries. Private capital flows to Eastern Europe are expected to remain stable at around $30 billion, and private capital flowing to Asia is expected to increase 50%, to $60 billion.

The Institute also said that spreads, or the difference in interest yields over equivalent U.S. Treasuries, are likely to narrow further.

"International investors and lenders are showing increasing confidence in emerging markets," said Institute managing director Charles Dallara in a release. "There is evidence that market participants are begining to put the crises of recent years behind them."

The Institute also forecast that direct foreign investment in plants and equipment and other assets in emerging markets would increase this year to $140 billion, from $120 billion last year, and predicted that equity investments will double to $34 billion.

Argentina needs to raise $17.5 billion in funding this year, and the $1 billion bond launched Tuesday is expected to be the first of several issues. About $10 billion of that country's financing will be raised on international capital markets, about half of that in dollars and the rest in euros and yen.

Brazil, which postponed a planned $2 billion, 20-year bond this month, is expected to bring that issue to market soon.

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