EM bond assets seen as safe amid U.S., Greek economic concerns; better buying reported

By Christine Van Dusen

Atlanta, July 27 - Continued concern about the United States' debt ceiling and the euro zone's financial instability translated into a better Wednesday for emerging markets assets, which saw big buying of cash bonds and good performance from such names as Ukraine, Abu Dhabi's First Gulf Bank PJSC and Cairo-based African Export-Import Bank (Afreximbank).

"They're very fast markets this morning," a London-based trader said. "EM is putting in a great performance."

Another trader said "EM is the new gold, it seems."

The Markit iTraxx SovX index was unchanged, as was the JPMorgan Emerging Markets Bond Index spread, which sat at Treasuries plus 272 basis points on Wednesday.

"But that doesn't tell the whole story, which is massive buying of cash bonds," he said.

The primary market, however, remained mostly quiet as a few issuers made small moves toward the market. On that list was Lebanon, Mexico's Grupo Elektra SAB de CV and Russia's CBOM Finance plc.

Lebanon gives guidance

Lebanon set price guidance for a planned issue of dollar-denominated notes due November 2016 and a tap of the sovereign's 6.1% notes due 2022, a market source said.

The 2016 notes were talked at 4¾% to 4.85% after earlier guidance of 4.85% to 4.9%. The 2022 notes were talked at the 6.225% area after earlier talk of 6.225% to 6.325%.

Blom Bank and Citigroup are the bookrunners for the Regulation S notes, which are expected to price this week.

"The buoyant mood is extending even to Lebanon, where there is some rare Street liquidity ahead of their new multi-tranche deal," a trader said. "The 2022 dollar notes are trading at Libor plus 310 bps. Personally I'd go for something like Novatek's 2021 dollar notes instead."

Said another trader, "The new Lebanon deal looks set to be a blow out ... it captures the local sweet spot."

Grupo Elektra, CBOM set talk

In other deal-related news, Mexico-based financial and retail corporation Grupo Elektra set price talk for its planned benchmark-sized offering of dollar-denominated notes due 2018 at the 7½% area, a market source said.

BCP Securities, Jefferies and UBS are the bookrunners for the Regulation S-only deal.

The notes are non-callable for four years and are expected to price on Thursday.

And Russia's CBOM Finance set price talk for its planned issue of three-year dollar-denominated notes at the 8¼% area, a market source said.

The issue is expected to total about $200 million.

Raiffeisen Bank International is the bookrunner for the Regulation S notes, which include a put at par on a ratings downgrade or change of control.

The notes are guaranteed by Credit Bank of Moscow, a lender.

First Gulf, Afreximbank eyed

In trading, good two-way flow was seen for the new issue of notes from Abu Dhabi-based First Gulf Bank. The $650 million issue of 3.797% notes due 2016 priced at par on July 26 via Citigroup, HSBC and Standard Chartered in a Regulation S deal.

On Wednesday morning, the notes were seen at 101.1 bid, 101.2 offered.

Another recent issue - $500 million 5¾% notes due 2016 from Cairo-based Afreximbank that came to the market at par - was trading at 102.50 bid, 102.75 offered on Wednesday.

Commerzbank, HSBC, Mitsubishi UFJ Securities and Standard Bank were the bookrunners for the Regulation S notes.

Ukraine outperforms

In other trading, Ukraine was "flying," a trader said. "It's like yesterday: the sovereign is flying while corporates lag."

Said another trader: "Ukraine is leading the way with the 2021s nearly back to the highs of the year, much in the same way that all things Dubai-related are performing."

Dubai's DP World's 2017 dollar-denominated notes were 60 bps tighter on the month.

"But even away from these highlights, the mood is very constructive, shrugging off global concerns," he said.

Turkey starts softer

From Turkey, sovereigns were slightly softer on the longer end in the morning, a trader said.

"Really only Turkey and Kazakhstan are lagging this move as activity there remains muted," he said.

On the corporate side, Garanti Bankasi AS' 2021s were "subdued" while Akbank's 2015s looked interesting in comparison to Yapi Kredi's 2015s, he said.

This came against the backdrop of Yasar Insaat's latest quarterly results, which met analysts' expectations.

"We consider current results as largely expected and neutral for the credit," an analyst said. "We also note that the group is about to refinance its short-term debt by August with a euro-denominated bilateral loan, thus not realizing the foreign exchange fluctuation, which will support the credit, in our view."

By the afternoon in Europe, Turkey was more solid, with five-year credit default swap spreads tightening 4 bps.

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