Emerging markets start solid, end on 'sour note'; Dubai Islamic prices $500 million sukuk

By Aleesia Forni

Columbus, Ohio, May 22 - Dubai Islamic Bank priced $500 million of 4.752% five-year sukuk on a very solid day in the emerging markets space, according to market sources.

"Today was the first day I can honestly say we had buyers come back," a New York-based source said.

"Particularly stuff in the Africa sovereign and corporate spaces performed well," he said, adding that Eastern European names were also better bid over the course of the morning.

However, news from the Federal Reserve of lower than expected GDP numbers late in the New York session "took the bite out" of the market later in the day.

With a relatively large correction in stocks and the euro breaking to its lows of the day near New York's close, "everything is going out on a very sour note," the source said.

Investors grab Russian risk

Emerging markets also saw a sentiment shift from Monday's close, which led to a "frenzy" for Russian risk on Tuesday, according to a London-based source.

Russia's bonds due 2042 were up 2 points on the day, though the "real spread moves" came from the Russian corporate space.

Promsvyazbank, Sistema and Evraz Group SA were all 30 basis points tighter on a spread basis on Tuesday.

Dubai prices sukuk

Dubai Islamic Bank priced $500 million of 4.752% five-year sukuk at par to yield mid-swaps plus 365 bps, according to a market source.

The deal priced 10 bps tighter than Monday's talk.

HSBC, Deutsche Bank, Dubai Islamic Bank, Emirates NBD and National Bank of Abu Dhabi were the bookrunners for the Dubai, United Arab Emirates-based bank's deal.

The deal was seen at 100.4 bid late in the London session, showing the strong pull for sukuk in the space.

Due to the ongoing trouble in Europe and the deteriorating equity markets in the United States, everyone is "on the defensive," one market source commented.

"One of the last places where fresh money is being implemented is in the Middle East, so these sukuk issues are kind of the last area that has natural demand right now," he added.

However, the source does not see this demand lasting much longer, though there is still "some fresh powder that can be put to work" in that part of the world.

"The region still has growth, still has liquidity and still offers some value on certain names on a spread basis," a London-based source commented. "However, [the Middle East] is simply not going to be immune from global sentiment."

PDVSA active, higher

Also in the secondary market, a trader said that Petroleos de Venezuela SA's bonds were actively traded on Tuesday, firming on the day.

He said that the Caracas-based state oil monopoly's 5 3/8% bonds due 2027 were finishing up 1 point, at 55 bid, on volume of over $12 million.

He saw its 8½% notes due 2017 trade even more busily, with over $30 million of turnover; the bonds ending at 84 bid, 84½ offered, also up 1 point.

Its 9% notes due 2021 firmed to 72½ bid, with over $27 million of volume.

There was no fresh news seen out Tuesday on the company.

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