Emerging market debt trades sideways; Shinhan to start roadshow

By Reshmi Basu and Paul A. Harris

New York, Feb. 14 - Emerging market debt traded sideways Tuesday, as U.S. Treasuries slid in response to strong U.S retail data.

In the primary market, two corporates will start investor roadshows.

Out of South Korea, Shinhan Financial Group will kick off a roadshow Thursday in Singapore for its dollar-denominated offering of 10-year upper tier 2 subordinated notes.

The size of the offering remains to be determined.

Subsequent investor presentations are scheduled for Friday in Hong Kong and Monday in London. Pricing is expected thereafter.

Barclays Capital, BNP Paribas and HSBC are the underwriters for the Regulation S-only offering.

And South Africa's Eskom Holdings Ltd. plans to start a roadshow for a €500 million offering of eurobonds (A2/BBB+) next week.

A roadshow is scheduled to start next Monday in Frankfurt and Munich, then off to Holland on Tuesday, next to Paris on Wednesday and wrapping up in London on Thursday.

The tenor is expected to be seven to 10 years.

JP Morgan and Calyon are running the Regulation S transaction.

EM unchanged

For the most part, emerging market debt was little unchanged on Tuesday. However there was a pick up in trading volumes from the previous session.

"Prices are close to yesterday's [Monday's] levels, depending on the credit," remarked a trader.

Spreads tightened even as U.S. Treasuries sold off.

Treasury yields shot up on Tuesday morning's release of January's retail data, which signaled stronger economic growth as well as the prospect of higher inflation.

The yield on the 10-year note jumped to 4.61% from Monday's 4.58%.

"On spreads, we're holding our own," noted the trader, who described the market's price performance as "uninspiring."

During the session, the Brazil bond due 2040 added 0.05 to 132 bid, 132.05 offered. The Argentina discount bond due 2033 shed 0.75 to 95.95 bid, 96.25 offered. The Russia bond due 2030 slipped 0.13 to 111.56 bid, 112 offered.

"After last week's tremendous run, I would think we would need to consolidate," commented the trader.

Additionally, investors were somewhat unwilling to add risk ahead of Wednesday's congressional testimony by new Federal Reserve chairman Ben Bernanke, noted a market source.

The source added that the market would pay close attention to every word uttered by the new chief, as the market looks for the Fed's perspective on key issues.

In other developments, Argentina's local press is reporting that the secretary of finance is considering an international dollar-denominated bond issue. This would be the first issue by the new finance team, which was formed after October's elections.

The "risk of attachment" of proceeds from the sale by remaining hold-out creditors is a major concern for the Treasury. Fiscal surpluses have allowed the Treasury to enjoy a certain amount of flexibility regarding financing strategies, according to a market source.

Nonetheless, this international issue is meant to send a signal of normalization between the country and international investors.

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