Korea's NACF prints notes as EM remains strong; Russia, Ukraine, Metalloinvest active

By Christine Van Dusen

Atlanta, Aug. 1 - As most markets spent the day focused on the deal to raise the debt ceiling in the United States - and noted some disappointing data on U.S. manufacturing in June - emerging markets assets soldiered on and saw a wave of buying on Monday while Korea's National Agricultural Cooperative Federation sold notes.

"Markets have started the week on a positive note following the news over the weekend that U.S. Congressional leaders have agreed to a deal to increase the debt ceiling," according to a report from RBC Capital Markets.

Said a trader: "With some good news at last in the form of a possible debt accord in the U.S., we have the green light for another wave of buying."

But as the day went on, the good mood faltered slightly.

"An initial bout of euphoric cash bond buying on the back of the proposed U.S. debt deal [was] replaced by a revival of euro periphery debt concerns, which has led to credit default swap spread levels trading higher by 5 basis points," a trader said. "That's not enough of a move to bring out sellers of cash bonds, though."

Indeed, another trader said, demand was constant but liquidity was not. "It's mixed, at best," he said. "The market trades technically on a lot of bonds."

All of this leaves emerging markets debt in solid shape as the summer doldrums begin to set in, a London-based market source said.

"With dealers talking their holidays and Ramadan in full swing, more ongoing demand for paper and not many willing to let go of inventory, over the summer we are left with a pretty solid tone," he said. "Coupled with the syndicate desks also getting their board shorts and sunscreen out, it feels like we can meander through the next few weeks until the new issue machine cranks up again in September."

NACF does deal

In the day's lone deal, Korea-based umbrella organization for agricultural and livestock cooperatives NACF sold $500 million 3½% notes due Aug. 8, 2017 at 99.569 to yield 3.587%, or Treasuries plus 228 basis points, a market source said.

The notes - part of the company's $8 billion global medium-term note program - priced at the lower end of guidance, which was set at the Treasuries plus 230 bps area.

Bank of America Merrill Lynch, Citigroup, Credit Agricole, Deutsche Bank and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes.

Monday also had market-watchers whispering about a possible issue of notes from Saudi Arabia-based Sabic Capital Ltd.

Russia, Ukraine strong

In trading, Russia's quasi-sovereign names saw broad-based demand, a trader said, and Ukraine was strong.

"The big story from Friday - the resignation of Turkey's military top brass - has led to a more considered reaction today with the sovereign curve a half-point higher from Friday's lows," he said. "Based on how investors view Russia and Ukraine, it is consistent that consolidation of power is well received by the market."

Said another Turkey-focused trader: "The sovereign curve is slowly reverting to Friday levels ... but activity is relatively low and only on the longer end of the curve. Generally, the majority seem to believe that these resignations are positive. However, others are voicing concerns about the concentration of power it implies."

On the corporate side, Akbank's 2015s were "doing good work" at about the 100 level, and "other banks are well supported on the Street," he said.

Metalloinvest tightens

Meanwhile, Russia-based Metalloinvest Finance Ltd.'s bonds were 5 bps to 10 bps tighter.

"Really only Kazakhstan banks are still lagging, with BTA Bank's 2018s still at 84," he said.

The recent issue of $650 million 3.797% notes due 2016 from Abu Dhabi-based First Gulf Bank that priced at par on July 26 continued to see solid demand in the secondary market, a trader said.

The notes were trading at 101.30 bid, 101.55 offered at midday in Europe.

"That feels OK, and of course it's a sukuk, so over time it will be fine," another trader said.

Also performing well was the $500 million issue of 5¾% notes due 2016 that Cairo-based African Export-Import Bank (Afreximbank) priced at par on July 20.

Abu Dhabi, Dubai solid

Taking a look at the Middle East and Africa, names from Abu Dhabi were well supported, with International Petroleum Investment Co. leading the way.

"Dubai's five-year credit default swaps trade at 321 [bps] and bonds remain very solid," a trader said. "The bellwether benchmark top tier names - I'm thinking DPWorld, Qtel International, Emirates - trade very well. They all feel well supported and today it proved difficult to replace paper. It's a classic situation at the moment with summer now in full swing, Ramadan commencing and the well-publicized and well known global issues and imbalances."

So, he said, the Middle East remains "something of a sweet spot."

"Global investors are probably and arguably slightly underweight in the region and hence happy to increase cash allocations to the region for diversification purposes," he said. "Generally overall debt ratios for the most part look good versus the so-called developed world."

South Africa well bid

South Africa started the day on pause, then jumped ahead of the pack, rallying 2 points to 1121/4.

"It's a sheepish start, but the usual suspects are all bid," he said.

Overall, spreads for Africa were struggling a bit, he said, though Nigeria's 2021s were powering on and GTB Finance BV saw buyers.

"There's no real budging of Egypt prices, although the 2040 dollar notes did trade a few times at 95," he said. "Gabon and Ghana are ticking higher in the afternoon session."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.