Islamic Development, China Eastern Airlines, DBS sell notes on volatile day for EM assets

By Christine Van Dusen

Atlanta, May 29 - Saudi Arabia's Islamic Development Bank, China Eastern Airlines Corp. Ltd. and Singapore's DBS Bank Ltd. sold notes on a Wednesday marked by significant volatility for emerging markets assets.

"Volatility and moves this month are quite impressive," a London-based trader said. "Very busy morning, and for the most part, clients are looking for the door. Some other houses have put the 'closed' sign on the front door. There are still a few bonds holding in well, but these are getting fewer and fewer by the day."

He was recommending that investors stick with Kuwait-based Kipco's 2020s, DPWorld's 2017s and Dubai Electricity and Water Authority's 2016s.

"Although it's worth watching the moves toward the 10-year and longer parts of the curves, as some names are getting beaten up," he said. "Very choppy, thin and fickle market."

The biggest moves were seen among long-dated bonds, as well as subordinated issues, he said.

"Emirates NBD and Abu Dhabi Commercial Bank literally got their sub deals away before the market turned, and as such these bonds are down 3 to 5 points with still plenty of left-field sellers.

Two-way trading was noted for corporates from Central and emerging Europe.

"Investors appear to be in a position where they simply have to continue putting cash to work," according to a report from Erste Group Research.

In trading from Latin America, a sell-off was seen for bonds from Venezuela and Petroleos de Venezuela SA (PDVSA), a New York-based trader said.

Venezuela's 2027s were quoted at 94, while PDVSA's 2017s were seen at 953/4, as much as 2½ points down.

"Argentina bonds moved lower by ¼ to 3/4," he said. "Overall, the market remains choppy with downward price action most of the day as risk aversion and poor liquidity push EM markets to recent wides and dollar price lows."

New issue from IDB

In its new deal, Saudi Arabia's Islamic Development Bank priced a $1 billion issue of 1.535% Islamic bonds due 2018 at par to yield mid-swaps plus 30 bps.

The notes were talked at a spread in the high-30 bps area.

Standard Chartered, Barwa Bank, Credit Agricole, CIMB, Natixis, National Bank of Abu Dhabi, NCB and RBS were the bookrunners for the Regulation S deal.

"If this one is like the previous ones, it will widen out in the first week of trading," a trader said.

Chinese airline prints bonds

Also on Wednesday, Shanghai-based China Eastern Airlines, through Eastern Air Overseas (Hong Kong), sold RMB 2.2 billion 3 7/8% notes due 2016 at par to yield 3 7/8%, a market source said.

Agricultural Bank of China, Deutsche Bank, HSBC, Standard Chartered Bank were the bookrunners for the deal.

DBS does deal

And Singapore-based DBS Bank priced RMB 500 million 2½% notes due 2016 at 99.76, according to a company announcement.

The notes were talked at 2.7%.

DBS Group Holdings was the bookrunner for the transaction.

The proceeds will be used for general corporate purposes.

Two-way for Afreximbank

The recent $500 million 3 7/8% notes due 2018 that African Export-Import Bank sold at 99.282 to yield mid-swaps plus 287.5 bps traded between 98.70 and 99.35 on Wednesday, the London-based trader said.

"The total day's volume is almost $12 million now," he said. "More two-way."

HSBC, Commerzbank, Mitsubishi UFJ Securities and Standard Bank were the bookrunners for the Regulation S deal.

The issuer is a Cairo-based international bank specializing in trade-related financing for Africa.

Middle East in focus

Two-way activity also was reported for Dar al-Arkan's 2018s while sellers were noted for Qatar and Qtel International, the London trader said.

"Everything is, in fact, 75% to 25% skewed to sellers across the board," he said. "Qatar's 2018s are still bid in the Street. Holders should move on."

The recent perpetual notes that Abu Dhabi Islamic Bank priced at par moved Wednesday to 103.37 bid, 103.87 offered, while the perpetuals from Dubai Islamic Bank - also priced at par - traded at 99.87 bid, 100.62 offered.

Ukraine bonds catch bid

Bonds from Ukraine have been slightly better bid so far this week, possibly in anticipation of a gas deal with Russia, said Svitlana Rusakova of Dragon Capital.

"But gains were quite limited," she said. "A gas deal with Russia would be taken as a serious positive."

At the same time, the Ukraine sovereign faces "headwinds" in anticipation of possibly supply, she said.

On the corporate side, the 9½% notes due 2018 that the State Administration of Railways Transport of Ukraine (Ukrzaliznytsia) priced at par have moved up about ¾ point.

CEZ deal oversubscribed

The Czech Republic-based CEZ Group's recent €500 million 3% notes due 2028 drew a final order book of more than €2 billion, a market source said.

The notes priced at 98.815 to yield mid-swaps plus 168 bps with Commerzbank, Deutsche Bank and Erste Group.

CEZ Group is a subsidiary of CEZ AS, a Prague-based conglomerate focused on electricity, trade and coal mining.

© 2015 Prospect News.
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