Diamond Bank, Bahrain, Israel Electric advance deals; spreads tighten; volatility remains

By Christine Van Dusen

Atlanta, June 10 - Though spreads narrowed following Friday's better-than-expected payrolls numbers out of the United States, the markets remained volatile on Monday as a result of continued protests in Turkey and concern about the global economic picture.

"So far, not good," a New York-based trader said. "Not surprised."

Turkish credit default swaps widened 3 basis points on Monday, while cash bonds moved out 5 bps. Meanwhile, U.S. Treasuries opened flat.

The Markit iTraxx SovX CEEME ex-EU index spread on Monday opened at 211 basis points, tighter by 16 bps. The Markit iTraxx Crossover index spread - sighted at 461 bps over Treasuries on Friday - started Monday at 436 bps.

"On Monday a moderately positive mood prevailed in global markets," according to a report from UFS Investment Co. "We expect high volatility to persist this week amid uncertainty over the Fed's meeting, due next week."

In trading from Ukraine, long-end offers have been moving down, said Svitlana Rusakova of Dragon Capital.

Though Friday's better data from the United States improved the mood and lifted offers for the sovereign's 2020s and 2023s, sellers' quotes remained unchanged, she said.

This suggests that "dealers are quite heavy on inventory and do not want to hold extra risk at the moment," she said. "Corporates generally performed in line with the sovereign."

In deal-related news, Nigeria's Diamond Bank plc was on a roadshow for a dollar-denominated issue of notes, Bahrain picked banks for a marketing trip and Israel Electric Corp. mandated leads for a roadshow of its own. And Poland is planning to price notes during the fourth quarter.

Russian bonds see demand

From Russia, demand rose for eurobonds on Monday, UFS said in its report.

"Demand for Russian eurobonds was caused by the market oversold-ness, excessive spread to Treasuries, as well as fading lower likelihood of [quantitative easing] reduction in the near term," the report said.

Considerable upside remains for Russia's 2030 and 2042 bonds, UFS said.

Diamond Bank on roadshow

Nigeria-based Diamond Bank is on a roadshow with African Export-Import Bank and BNP Paribas for a dollar-denominated issue of notes, a market source said.

The roadshow began on Monday.

A Rule 144A and Regulation S issue is expected to follow.

Israel Electric mandates banks

And the Israel Electric Corp. has mandated Barclays and Citigroup for a Rule 144A and Regulation S roadshow starting Tuesday for a dollar-denominated issue of notes.

The Haifa-based publicly controlled utility's board of directors recently approved the issue of $1 billion of debt.

The board also approved, subject to market conditions, the extension of an additional issue, which will require the approval of a committee for determination of capital and interest that will be appointed by the board.

Bahrain picks leads

Bahrain has mandated BNP Paribas, Citigroup, JPMorgan and Gulf Investment Bank for a benchmark-sized and dollar-denominated issue of notes that will be marketed during a roadshow, a market source said.

The roadshow will be held from June 12 to 18, with stops in the United States, London, Riyadh and Abu Dhabi.

"We are seeing some sellers this morning," the analyst said, referring to the sovereign's existing bonds.

And Poland is looking to price a eurobond in the fourth quarter, a market source said.

UOB deal oversubscribed

The final book for Singapore-based United Overseas Bank's RMB 500 million 2½% notes due 2016 was more than RMB 1 billion from 26 accounts, a market source said.

The notes priced Friday at 99.713 to yield 2.6% with United Overseas Bank, BNP Paribas, HSBC, Societe Generale and Standard Chartered Bank in a Regulation S deal.

About 52% of the orders came from Singapore, 45% from Hong Kong and 3% from Europe.

Banks accounted for 42%, fund managers 35%, private banks 13% and others 10%.

Turkish ratings unaffected

Taking a closer look at Turkey, the London analyst noted that the protests have continued in spite of the prime minister's recent warning that his patience was wearing thin and that he was calling for counter-rallies.

"On a more concerning note, the PM stated that financial speculators would not be allowed, and urged people to put their money in the state, not private banks," she said.

Meanwhile, Moody's Investors Service and Fitch Ratings have both said that the protests should have no impact on ratings.

"This will come as a relief to investors, although there will be concerns that the protests do not show any signs of halting," she said.

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