Turkey, U.S. economic moves drag out volatility for EM; spreads widen; primary quiets

By Christine Van Dusen

Atlanta, June 5 - Emerging markets investors remained spooked on Wednesday amid mixed economic data from the United States, continued instability in Turkey and concerns about the possibility that the Federal Reserve will pull back on quantitative easing.

"The markets have been volatile," a New York-based trader said. "Can't seem to stop the bleeding."

The Markit iTraxx SovX CEEMEA ex-EU index spread on Wednesday moved 7 basis points wider to 211 bps over Treasuries. The Markit iTraxx Crossover index - sighted at 418 bps over Treasuries on Tuesday - moved out to 435 bps on Wednesday.

The Fed-related uncertainty has led to higher rates, which has strengthened the U.S. dollar, causing emerging markets currencies to suffer and leading to a blowout in local rates, a Connecticut-based trader said.

"That's now spilling into the dollar bonds in each of the EM countries," he said. "There will be prolonged bouts of weakness. And it doesn't feel like it's over yet."

Indeed, market sources expect the volatility will remain until the Fed's meeting on June 20 and June 21. And while the situation in Turkey improved somewhat on Tuesday with an apology from the country's deputy prime minister, protests continued into Wednesday.

"Turkey sovereign paper is opening 10 bps wider this morning while the rest of the market is in a risk-off mood, generally," a London-based analyst said.

Meanwhile, primary market activity has been muted, the Connecticut trader said.

"It's interesting that new issuance has slowed down significantly," he said. "It will be interesting to see what outflow number we get this week. All eyes will be on that."

Ukraine, Russia in focus

Sovereign bonds from Ukraine were mostly unchanged at mid-week, said Svitlana Rusakova of Dragon Capital.

"Corporates were mostly flat," she said. "Bits of demand in higher-yielding names."

Bonds from Russia, meanwhile, got some support from rising oil prices, according to a report from UFS.

"We expect Eurobond strengthening if [Treasury yields stay] yield at the current levels," the report said.

Uralkali may issue notes

Also from Russia, Russia-based potash producer Uralkali is considering a tap of its existing $650 million 3.723% five-year notes that priced at par to yield mid-swaps plus 285 bps.

The tap is expected to price this month.

BofA Merrill Lynch, Goldman Sachs, Sberbank and VTB Capital were the bookrunners for the original Rule 144A and Regulation S deal.

BNDES to market notes

Brazil-based Banco Nacional do Desenvolvimento (BNDES) is planning a roadshow for an issue of up to $3 billion of notes, a market source said.

The marketing trip will take place in London, New York, Boston and Los Angeles.

Deutsche Bank, Itau BBA and JPMorgan are arranging the roadshow.

The proceeds will be used to finance the company's lending program.

BMCE plans dollar deal

Morocco's Banque Marocaine du Commerce Exterieur (BMCE Bank) is looking to issue $500 million notes due in five years, a market source said.

No other details were immediately available on Wednesday.

BMCE Bank is based in Casablanca, Morocco.

Latvia to hit road

Latvia will set out on June 10 for a roadshow to market a possible issue of notes, a market source said.

Citigroup, JPMorgan and Societe Generale are organizing the trip, which will travel to London, Vienna, Frankfurt and Amsterdam before concluding on June 14 in Paris.

Chinese corporate issue ahead

China Longyuan Power Group Ltd., through subsidiary Hero Asia Investment Ltd., is planning an issue of dollar-denominated notes due in three years, a market source said.

Goldman Sachs, Citic Securities, UBS and Morgan Stanley are the bookrunners for the Regulation S deal.

A roadshow began on Wednesday.

China Longyuan Power is a Beijing-based wind power producer.

Nomos prices bonds

On Tuesday, Russia's OAO Nomos-Bank priced $300 million 10% notes due 2019 at 109.221 to yield 8.15%, a market source said.

Gazprombank and VTB Capital were the bookrunners for the Rule 144A and Regulation S deal.

Nomos-Bank is a Moscow-based lender.

Huaneng Power prints notes

China Huaneng Power International Inc. sold $400 million 3 3/8% notes due 2018 at 99.763 to yield 3.427%, or Treasuries plus 240 bps, a market source said.

JPMorgan, Bank of China, Wing Lung Bank, CCB International Capital, DBS Bank, Goldman Sachs and ICBC Asia were the bookrunners for the Regulation S deal.

Based in Beijing, Huaneng develops, constructs and operates large power plants in China.

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