Nov. 25 (Bloomberg) -- Trading in emerging-market debt plunged 43 percent in the third quarter to the lowest since 2003 as the global financial crisis choked off demand for higher- yielding securities.

Trading totaled $946 billion in the quarter, down from $1.67 trillion in the year-earlier period, the Emerging Markets Traders Association, or EMTA, said in a statement. Trading was down 22 percent in the third quarter from the second, the survey by New York-based EMTA showed.

Investors have shunned emerging-market debt as the biggest financial meltdown since the Great Depression has curtailed access to credit, deepened a global economic slowdown and pushed down prices on developing nations’ commodity exports.

“We’ve got to the point where the market has scared everyone,” said Paul McNamara, who helps manage $1.2 billion of emerging-market assets at Augustus Asset Managers Ltd. in London. “Almost all market participants have seen withdrawals over the last two months.”

The extra yield investors demand to own developing-nation debt instead of U.S. Treasuries narrowed 3 basis points today to 7.16 percentage points at 9:20 a.m. in New York, according to JPMorgan’s EMBI+ Index. A basis point equals 0.01 percentage point. The spread has more than doubled in the past six months and touched a six-year high of 8.65 percentage points on Oct. 24.

Trading in local-currency debt totaled $643 billion in the third quarter, accounting for 68 percent of all volume, EMTA said. Brazil’s debt was the most traded in the quarter, with $204 billion of the country’s debt changing hands. That represents a decline of 33 percent from a year ago, EMTA’s survey showed.

To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net

Last Updated: November 25, 2008 09:44 EST