Emerging markets tighter but quiet as Treasuries fall; RasGas narrows talk; deals take focus

By Aaron Hochman-Zimmerman

New York, July 15 - Emerging markets tightened in sympathy with U.S. Treasuries, but the market's focus was on new deals rather than trading.

Trading was light across the board, although bonds would move "if it wasn't for all these new issues," a buysider said.

Qatar's RasGas narrowed talk for its three tranche $1.3 billion deal as the offer book grew.

Colombia's Ecopetrol SA and Kazakhstan's KazMunaiGaz were also in the market with talk.

Meanwhile, in the light trading, the Philippines' new bonds due 2020 continued to gain as they were spotted at 104½ bid.

From the major markets, despite equity gains, volatility modestly but steadily rose throughout the session to end up by 0.87 at 25.89, according to the VIX index. The index is a frequently used yardstick of market volatility.

Treasury yields went climbing along with stocks on Wednesday, leading emerging markets to tighten by 17 basis points to a spread of 413 bps, according to JPMorgan's EMBI+ index. The EMBI+ determines the amount of extra yield investors will demand to hold assets in emerging market debt.

Tighter talk

RasGas narrowed talk for the three tranches of its $1.3 billion offering of three-, five- and 10-year senior secured bonds (Aa2/A/A+) on Wednesday based on the size of the offer book which was "out of control," a buysider said.

The $500 million three-year bonds were talked at Treasuries plus 300 bps, revised from Treasuries plus low to mid 300 bps for a yield of 4.30%.

The $1.15 billion five-year bonds were talked at Treasuries plus 312.5 bps, revised from Treasuries plus mid 300 bps for a yield of 5¼%.

The $615 million 10-year bonds were talked at Treasuries plus 325 bps, revised from mid to high 300 bps for a yield of 6.35%.

The bonds are expected to price Thursday.

Citigroup, Credit Suisse and HSBC are bookrunners for the deal.

RasGas is a Doha, Qatar-based government-run energy firm.

Two from Colombia

Ecopetrol SA issued talk at Treasuries plus 425 bps for its $1.5 billion 10-year bonds.

Barclays Capital and JPMorgan will act as bookrunners for the bonds.

Proceeds will be used to fund the company investment plan.

Ecopetrol is a Bogota, Colombia-based energy firm.

As happened with RasGas, Ecopetrol may also tighten its guidance, in this case to near Treasuries plus 412.5 bps, a buysider said.

Also from Colombia, Empresas Publica de Medellin is currently marketing a 10-year bond via Bank of America Merrill Lynch and JPMorgan.

Empresas Publica de Medellin is a Medellin-based energy firm.

Gazprom, KazMunaiGaz deals

Russia's OAO Gazprom announced that it will hold a series of fixed-income investor meeting in the Unites States and Europe.

JPMorgan and Morgan Stanley will host the U.S. roadshow, while BNP Paribas and Societe Generale will host the European roadshow.

Meetings will be held on the U.S. west coast and in Frankfurt, Munich and London on July 20. The roadshow will be in New York, Paris and London on July 21.

Gazprom is a Moscow-based government run energy firm.

Meanwhile, KazMunaiGaz issued talk at 12% yield for its upcoming "long" five-year bonds.

The bonds are due in 2015.

JPMorgan and Citigroup will act as bookrunners for the deal.

KazMunaiGaz is an Astana, Kazakhstan-based government run energy firm.

Emerging Europe mixed amid supply

Also in Russia, the oil firm TNK-BP was believed to be crafting a deal with JPMorgan and Barclays, but details were not available.

On the economic front, the country's GDP was lower by 10.1% in the first half compared to the first half of 2008, according to economic development minister Elvira Nabiullina, reports said.

Still, Nabiullina said the crisis is slowly abating and that the total yearly GDP is expected to fall by 8% to 8.5%.

The Russian government bonds due 2030 slipped ½ point to 98 bid, 99 offered.

Also, Russia will attend a summit hosted by the European Union to discuss Ukraine's ability to pay for Russian gas on Friday, the Kyiv Post reported.

Russia's bank Troika has been rumored to be in talks with Kiev over a $4 billion loan in order to cover gas debts.

Elsewhere, in Turkey, the benchmark bonds due 2030 continued to perform well by adding 1 point to 154 bid.

LatAm weak on slow flow

In Latin America, "it's pretty quiet," however, Ecuador sent a scare through the market which ended more like a false alarm, a buysider said.

There were rumors that Quito would default on some of its multi-lateral debt.

The 9 3/8% Ecuadorian bonds due 2015, which remained after defaults of its bonds due 2012 and 2030, hardly moved from 72 bid, 75 offered.

"It was just a rumor," the buysider said.

In Venezuela, the national oil company, PDVSA issued local debt, which seemed to put downward pressure on the sovereign as well as the issuer's bonds.

The 9¼% Venezuelan government bonds due 2027 dropped by 1 point to 64½ bid, 65½ offered, while the PDVSA bonds also due 2027 were lower by 1 point at 37 bid, 37½ offered.

Also in Argentina, investors supported the 8.28% Argentine discount bonds due 2033 after "we saw a little bit of profit taking on the back of the rally," the buysider said.

Some had hopes of major changes after the legislative election defeat handed to president Cristina Kirchner, but "I don't think it was imminent that they would turn market friendly all of a sudden," the buysider said.

The bonds added ¾ point to 52 bid.

Asia strong after new supply

Asian trading was calm after a spate of new deals, however Sri Lanka prepared to hit the roadshow circuit on Friday.

It remained unclear what sort of offer would come from the meetings, but given the island's violent history, "we would not be very interested in that," a buysider said.

Meanwhile in the Philippines, the new 6½% sovereign bonds pressed higher from pricing Monday at 99.065. The bonds were seen at 104½ bid.

Also, the Philippines' overseas remittances grew by 3.7% to a record high of $1.38 billion in May, compared to May of 2008, according to the central bank.

"The stream of remittances from overseas Filipinos continued to show signs of strength despite lingering global economic fragilities, providing some basis for cautious optimism regarding steady remittance levels for 2009," bank governor Amando Tetangco said in a statement.

Remittances are expected to remain high throughout the year after new labor agreements were signed with Qatar and Saudi Arabia as well as Canada, Australia and Japan.

The United States, Canada and Saudi Arabia remained the top employer of overseas Filipino workers by salary amount.

In China, foreign currency reserves added $178 billion in the second quarter to surpass the $2 trillion mark, reports said.

China has by far the largest foreign currency reserve in the world.

The jump in currency holdings was taken by many as a sign of recovery for the Chinese economy.

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