Turkey, Dubai Islamic Bank stand out; Ukraine tensions rise; Masisa attracts attention

By Christine Van Dusen

Atlanta, May 2 - Bonds from Turkey and Dubai Islamic Bank put in a strong trading session on Friday as violence in Ukraine ramped up and investors kept a close eye on economic data from the United States.

"Markets were relatively subdued heading into today's U.S. payrolls report, with a continuation of the recent positive trend in EM carry trades," according to a report from Barclays. "Today's U.S. employment report should be a big test."

The report showed the employers increased payrolls in August by the largest amount in two years.

Meanwhile, in southern Ukraine, there were reports of fatal clashes between pro-Russian separatists and supporters of the Ukrainian government.

"Tensions are rising," a London-based analyst said. "Any physical invasion by Russian troops would clearly lead to a major step-up in sanctions, although at the same time it appears America is being restrained by Europe from being overly aggressive in actions."

Russia's five-year credit default swaps widened 20 basis points on Friday.

"There had been concerns that companies such as Gazprombank, VEB and Gazprom could be targeted, but in the end, these were proven overblown," she said. "The region remains directionless, however."

Bank bonds from the region ended the week about 27 bps wider, on average.

"Russian Agricultural Bank was the weakest performer, with the '21 subs 117 bps wider on the back of large selling by a large account," she said. "Corporates were 8 bps wider."

Evraz Group was a solid performer, with its 2018s 23 bps tighter, she said.

"Elsewhere, EM remains as strong as ever, with limited supply," she said.

Turkey stays strong

Bonds from Turkey remained strong, though selling did increase, the analyst said.

Turkey's Turkiye Finans Katilim Bankasi AS saw its 2016s tighten.

"Corporates were relatively flat as well, although we saw buyers of Efes, which was 13 bps tighter on the week," she said.

In Central and emerging Europe, sovereign paper had a solid week, with Slovenia's 2024s narrowing 16 bps and Serbia's 2021s tightening by 19 bps.

"Latvia, however, underperformed," she said. "The 2020s were 5 bps wider."

New issues active

Recent new issues from Abu Dhabi National Energy Co. (TAQA) and Abu Dhabi's Mubadala Development Co. PJSC were active in the secondary market on Friday, a London-based trader said.

The $750 million 3 7/8% notes due May 6, 2024 that TAQA priced at 99.369 to yield mid-swaps plus 115 bps widened slightly at the end of the week, he said.

"U.S. Treasuries rallied yesterday into 2.6%, so this one lagged a little," he said. "Still a pretty impressive deal, and it doesn't feel like there are too many bonds around."

BofA Merrill Lynch, Mitsubishi UFJ Securities, RBS, Societe Generale CIB and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

Mubadala 'solid'

Abu Dhabi's Mubadala's $750 million 3¼% notes due April 28, 2022 that priced at 98.53 were "very solid," the trader said.

The notes came to the market to yield 3.462%, or Treasuries plus 120 bps, with BofA Merrill Lynch, Credit Agricole, Deutsche Bank, Goldman Sachs, HSBC and National Bank of Abu Dhabi in a Rule 144A and Regulation S transaction.

"Very solid, and the success of this deal has boosted the secondary for the 2019s and 2021s," the trader said. "New issues reinvigorate curves."

Dubai bank outperforms

The week's best-performing bonds from the Middle East included Dubai Islamic Bank's perpetuals - which were trading at 100½ bid, 101 offered - and TAQA's 2017s, as well as Saudi Arabia's Dar Al-Arkan Real Estate Development Co., the trader said.

"Investors continue to be attracted by the region's perceived safety and low volatility," she said. "In the banking space, perpetuals were popular."

Abu Dhabi Commercial Bank underperformed, however, with the 2023s widening 4 bps.

"But nothing particularly stands out," she said. "In the corporate space it was a similar story."

Masisa sees 'healthy' volumes

From Latin America, the recent issue of notes from Chile-based Masisa SA - $300 million 9½% notes due in 2019 that priced at par - traded between 100.65 and 101.15 on Friday, a New York-based trader said.

Deutsche Bank, Itau BBA, JPMorgan and Scotiabank were the bookrunners for the Rule 144A and Regulation S deal.

"Steady Street volumes continue, which is healthy for a $300 million issue on its fourth trading day," he said.

Petrobras tightens

Spread-based credits from Latin America outperformed on Friday, the New York trader said, with names like Brazil's Petrobras moving as much as 3 bps tighter.

"Most high-grade credits sit close to unchanged after a fierce rally on the long bonds," he said. "Braskem's 2024s also gapped higher as dealer inventories remain on the light side. Nobody is willing to sell what they don't have and set up short, so they sell and cover."

Real-money inquiries were strong and steady, he said.

Ocensa ticks down

Colombia-based Oleoducto Central SA's (Ocensa) 4% notes due May 7, 2021 that priced at 99.367 to yield Treasuries plus 185 bps moved ¼ point lower on light selling, the New York trader said.

Citigroup and HSBC were the bookrunners for the Rule 144A and Regulation S deal.

Meanwhile, "Peruvian and Colombian bank paper seems very difficult to source," he said.

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