Turkey's GarantiBank, Brazil's Banco Santander print notes; ECB's plan sparks optimism

By Christine Van Dusen

Atlanta, Sept. 6 - Turkey's GarantiBank International NV and Banco Santander (Brasil) SA priced notes on a Thursday bolstered by the European Central Bank's plan to buy short-dated bonds and the United States' release of stronger-than-expected economic data.

"Risk assets rallied during the European morning session on a wave of ECB optimism," according to a report from Barclays.

The optimism was encouraged by a rise in private-sector jobs for August and a drop in weekly jobless claims.

But some market sources urged caution and calm.

"Investors may ultimately remain disengaged given additional event risk associated with the U.S. employment report on Friday," Barclays said.

Still, emerging markets bonds saw spreads tighten, with the Markit iTraxx SovX index spread narrowing Thursday to 224 basis points over Treasuries.

"EM opens on the front foot," a trader said. "All trading well."

The conditions were "perfect" for GarantiBank to bring its new deal, a London-based trader said. "It should do well."

Other banks from Turkey were fairly active on Thursday, and the Turkey sovereign was performing at 162 bid, 164 offered for its five-year bond, he said.

In other trading on Thursday, Dubai Water and Electricity Authority's 2020 notes continued to make big moves, trending 45 bps tighter.

"It's amazing how the world woke up to being a buyer of [Dubai Water and Electricity]'s 2020s the past two days," the London trader said. "That's 34 bps tighter on the week now."

Qatar saw some selling during Thursday afternoon, he added. And names from Dubai, including Jebel Ali Free Zone (Jafza), saw good buying.

"There are not many bonds below par left in the Dubai space," another trader said. "The Gulf region is crying out for some supply."

GarantiBank sells bonds

In its new deal, GarantiBank priced a two-tranche issue of $1.35 billion notes due in 2017 and 2022 via Bank of America Merrill Lynch, Citigroup, Commerzbank and Morgan Stanley.

The five-year tranche priced at a spread of Treasuries plus 350 bps. The notes were talked at the Treasuries plus 375 bps area before guidance was tightened to the 365 bps area.

The 10-year tranche priced at a spread of Treasuries plus 370 bps. The notes were talked at the Treasuries plus 390 bps area, then tightened to the 380 bps area.

No other details were immediately available on Thursday night.

Brazil bank does deal

In another new issue, Sao Paulo-based Banco Santander priced a $500 million add-on to its 4 5/8% notes due Feb. 13, 2017 at 101.291 to yield 4.3% via Bank of America Merrill Lynch in a Rule 144A and Regulation S transaction.

The original issue of $800 million notes came to the market in February 2012 at 99.414 to yield Treasuries plus 400 bps.

Proceeds will be used for general corporate purposes.

KDB issues notes

This followed the Wednesday pricing of Seoul-based Korea Development Bank's $750 million 3% notes due Sept. 14, 2022 at 98.781 to yield Treasuries plus 155 bps.

Credit Suisse, HSBC, JPMorgan, KDB Asia, Morgan Stanley and RBS were the bookrunners for the Securities and Exchange Commission-registered deal.

Proceeds will be used for general operations, including extending foreign currency loans and repayment of maturing debt and other obligations.

Aruba gives guidance

Also on Thursday, Aruba set price guidance for its $253 million issue of notes due 2023 at the 4 7/8% area, a market source said.

Credit Suisse and UBS are the bookrunners for the Rule 144A and Regulation S deal.

In trading, front-end curves from the Middle East were well offered, a London-based trader said.

"The technicals still feel very good, to my mind," he said. "Taking a look around the world - seeing where Korea, Brazil, Chile, Panama, Colombia and Malaysia credit default swaps are trading - there's no reason why Saudi Arabia, Qatar and Abu Dhabi cannot move lower."

Zambia deal ahead

One trader was keeping an eye out for the planned issue of notes from Zambia, which set out on Thursday for a roadshow to market a Rule 144A and Regulation S transaction.

The sovereign is comparable to other African names, like Ghana, Egypt, Kenya, Angola, Cameroon, Senegal and Gabon, the trader said. Globally, Zambia is similar to Lebanon and Sri Lanka.

Zambia's "gross domestic product is good, expected at 7% for 2012," he said. "The debt-to-GDP ratio is reasonably low, commensurate with a higher rating. However, we note that the majority of the proceeds of a potential bond will be invested in non-revenue-generating areas such as infrastructure."

The market is hungry for paper from Africa, he said.

"The existing names are very well placed and tricky to source," he said. "The 144A will hugely help, opening up the bond to the big U.S. funds."

Zambia could yield 5 7/8%

In terms of the expected pricing for the Zambia deal, a trader is guessing at a yield of 5 5/8% to 5 7/8%.

"Let's assume it's a $500 million 10-year," he said. "It's a debut issue, so we have to allow a little for that. If we assume it's north of Nigeria and south of Senegal, a z-spread of 400 bps is a little above the Sri Lanka 2022s and gives a yield-to-maturity of 5 5/8%-ish."

That is 75 bps above the bid yield on Nigeria's 2021s, he said.

"But bear in mind it will be 13 points lower in cash price," he said. "Likewise, Senegal trades 15 to 16 points above par."

South Africa in focus

Meanwhile, credit default swap spreads for South Africa were at 137 bps, a trader said.

South Africa-based Investec Ltd. saw its 2017 notes open at 98.25 bid, 99.25 offered on Thursday.

"That's trading about 100 wide, bid-to-bid versus FirstRand, which is very tricky to source," the trader said.

Later in the day the Investec notes were seen at 98.37 bid, 99.37 offered. Near the close of the session, the notes were 7 bps tighter, at 98.37 bid, 99.12 offered.

Nigeria's Access Bank was 10 bps tighter on the week, at 103.25 bid, 104.25 offered.

Ukraine notes rally

From Ukraine, sovereign bonds have been rallying this week, according to Svetlana Rusakova of Dragon Capital.

"The long end of the curve added ¾ of a point to one point," she said.

The sovereign's 2021 bonds were seen at 95.75 bid, 96.75 offered, versus the previous level of 95 bid, 96 offered.

"Ukraine's 9¼% 2017s gained about a half-point on the day, to 102 bid, 103 offered," she said.

On the corporate side, some prices moved higher and sellers were noted for Metinvest's 2018 notes at 93 bid, 94.5 offered. Supply was noted for Mriya Agro Holding in the 89.5 to 91.5 area.

Belarus bonds flat

Looking to Belarus, eurobonds remained flat, UFS said in a report.

The sovereign's 2015 bonds closed at 99 while the 2018s ended the day at 95.5.

"Belarus' 2018s are investment-attractive," the report said. "The spread between Belarus' 2018 and the Ukrainian yield curve already totals 140 bps. We think that in the near-term the yield on Belarus' 2018 will contract to 30 to 40 bps, suggesting price growth by 2% to 2½%."

The company also recommends that investors buy Russia-based Vimpelcom's 2018 and 2021 bonds, Evraz Group's 2017 and 2018 bonds and VTB's perpetual eurobond.

"The short-term bonds of Kazkommertsbank maturing in 2013 and 2014 may be of interest," UFS said.

The company's 2013s are trading at a yield of 6.9% while the 2014s are offering a 7¾% annual yield.

"In our view, these levels are attractive," the report said.

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