Rusal plans notes on cautious, quiet day for emerging markets debt; bond funds see inflows

By Christine Van Dusen

Atlanta, Dec. 17 - Russia-based Rusal was alone in announcing an upcoming issue of notes on a Friday that saw investors keeping one eye on the political unrest in the Ivory Coast while holding tight to the gains they've made so far this year.

"Volumes are considerably lighter," a Connecticut-based trader said. "Other than Ivory Coast, it's mostly just year-end window-dressing. A few accounts are still taking some money off the table on a few credits that are close to the tights of the year, and dealers are kind of pushing the street around a little bit.

"But practically everyone on the London and Europe side is actually having trouble getting accounts to even respond to anything. They've pretty much packed it in entirely."

The other major theme on Friday: Emerging markets bond funds finally saw inflows again, breaking a three-week outflow streak.

"People have started differentiating among bond groups, and the EM story still generally sounds like a better one to them," said Cameron Brandt, senior analyst with data tracker EPFR Global.

Inflows return

Inflows totaled $442 million for the week ended Dec. 15, EPFR said, as flows into funds with hard currency mandates hit a five-week high.

"Year-to-date flows into these funds remain north of $50 billion, over five times the previous full-year record set in 2005," EPFR said in its report.

"It didn't hurt that commodity prices and oil prices are generally moving higher again," Brandt said. "A lot of the repayment schedules for EM bonds do still depend on that."

Among the funds tracked by EPFR, those that have performed the best so far have been Asia-focused, he said. "They've stood out in terms of being able to attract funds."

Aeropuertos Argentina active

Though volumes were thin on Friday, one recent issue got some attention in the market. The $300 million 10¾% notes due 2020 from airport administration company Aeropuertos Argentina 2000 - which priced this week at par via Credit Suisse and Morgan Stanley - were active, the Connecticut trader said.

"People were a little bit negative on that one," he said. "But it was active and performed well. It's up close to 4 points despite some negative sentiment on it. I think they're not crazy about the revenues on a couple of the clients on this deal. I think some were scared off by, with it being $250 million, what should be perceived as a lack of liquidity.

"Others were not thrilled and thought there should have been more extra yield pick-up. But I think it reflects how much cash is out there earmarked for EM, that it performed as well as it did," he said.

Dubai Water well supported

In other trading, cash prices were pushed somewhat higher due to a rise in the 10-year Treasury to about 3.41% by the European close.

Both Dubai and Dubai Water & Electricity Authority remained well supported on Friday, a London-based trader said. Dubai Water's 8½% 2015s - which were seen trading earlier in the week at 105.70 bid, 106.10 offered - were at 106.00 bid, 106.40 offered on Friday.

Meanwhile, Abu Dhabi-based government investment fund Mubadala's 5¾% notes due 2014 were seen trading at 108.25 bid, 108.75 offered. On Tuesday those notes were seen at 108.55 bid, 108.75 offered.

The issuer's 7 5/8% notes due 2019, which were seen at 117.15 bid, 117.55 offered earlier in the week, were trading at 117 bid, 117.50 offered on Friday.

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