Korea sovereign bookrunners emerge; Russia steady as Yukos developments seen positive

By Paul A. Harris

St. Louis, Aug. 2 - Sources throughout the market reported slow going during the Monday session.

In the primary market, bookrunners and a broad time frame were heard for the upcoming Korean sovereign bond, which will likely be fall business.

Overall prices were largely unchanged on sparse trading activity, secondary market sources told Prospect News.

Meanwhile Christian Stracke, an emerging markets analyst for CreditSights, told Prospect News on Monday that for issuers in the asset class borrowing costs are going up as investors presently are juggling three daggers, in terms of risk.

The sharpest of these, according to Stracke, is the one labeled "short-term U.S. interest rates."

"Issuers are paying higher rates than they were at the beginning of the year, with the main culprit being rising U.S. interest rates," Stracke commented in an email message.

"Geopolitical uncertainties have had some impact on borrowing costs, especially immediately after the Madrid bombings," he added, making reference to the March 11 attack on four commuter trains that killed 191 people and injured more than 2,000 - attacks blamed on Islamic militants with suspected ties to al Qaeda.

"But in general," Stracke continued, "emerging markets has been much more attuned to swings in U.S. interest rates than it has been to the geopolitical risk story.

"Things are also complicated by the fact that some oil-exporting credits - particularly Venezuela, Russia and Ecuador - stand to profit from the geopolitical risks and higher oil prices."

Among names in the Venezuelan, Russian and Ecuadorian spheres sources reported little movement during the Monday session.

One source saw Ecuador slightly weaker.

Meanwhile another source, a trader, said that the Ecuador component of JP Morgan's Emerging Markets Bond Index (EMBI) was up 0.42%.

Meanwhile with regard to Russia, the trader saw the benchmark sovereign due 2030 unchanged at 91.80 bid, 92.05 offered.

"There was semi-positive news regard the Yukos case," the trader recounted, recalling that late last week the Russian courts granted the petroleum company one month to pay some of its back taxes.

Elsewhere, a ruling by a Russian court appeared to buoy the oil giant: the court rule that Yukos does not have to pay a 6.7 billion ruble fine for its delay in paying its tax bill, a fine it incurred in July after it failed to meet a deadline to pay 99.4 billion rubles in back taxes.

As further evidence that the capital markets might be digesting the recent Yukos developments in a positive light, the trader also noted that Yukos shares rose 16% to close the day's trading at $4.23.

All quiet on Latin front

Secondary trading in Latin names was also reported to be quiet on Tuesday.

Aside from the mixed reports on Ecuador mentioned above, two sources had Argentina slightly weaker, with a trader spotting the Argentine sub-index of the EMBI lower by 0.17%.

Ones source quipped that a recent ad appearing in The New York Times and The Financial Times defending Argentina's debt restructuring offer and signed by U2 rock star Bono and Nobel laureate Gabriel Garcia Marquez, among others, appeared to have done the country's sovereign debt little good.

Vitro firms

Meanwhile corporate bonds from two Mexican companies were seen unchanged to slightly higher, compared to levels reported early last Friday.

Mexican cement-maker Cemex SA de CV's notes due 2009 were at 118.50 bid, 119.25 offered, early Monday, basically unchanged from 118.50 bid, 119.00 offered on Friday.

The source said that the company reported higher sales and operating profit in the second quarter on Friday.

Also unchanged were the 2007 bonds of Mexican glass-maker Vitro SA de CV, seen at 100.25 bid, 101.25 offered.

However the company's strong second quarter results, reported early last weak, appeared to be giving a lift to two of its other existing issues.

Vitro's 2011 paper was seen early Monday 95.25 bid, 96.25 offered, having firmed from Friday's 95.00 bid, 96.00 offered.

Meanwhile the company's 2013 maturing notes were 92.80 bid, 94.00 offered, early Monday, improved from Friday's 92.50 bid, 93.50 offered.

Quiet new issue market

One buy-side source told Prospect News that the dearth of news in the emerging markets pipeline can be attributed more to the end-of-summer season, than to any other factor in particular.

The day's only solid news bore upon the anticipated $1 billion 10-year sovereign deal from South Korea.

Barclays Capital, Citigroup, Deutsche Bank Securities and JP Morgan have the bookrunning mandate on the deal which is expected to come in September or October.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.