Korea National Oil sells bonds; turmoil in Egypt, instability in Portugal widen spreads

By Christine Van Dusen

Atlanta, July 3 - The military coup in Egypt - along with instability in Portugal and the upcoming July 4 holiday in the United States - kept trading limited and spreads wider for emerging markets assets on Wednesday.

"Market's focused on negative headlines from peripheral Europe this morning as the Finance Minister and Foreign Minister of Portugal have now both offered their resignations, applying pressure to Portuguese yields," a London-based analyst said. "US Treasuries are rallying on the sentiment to 2.42% and our market is opening lower."

The news in Portugal led yields on the sovereign's bonds to climb as much as 120 basis points, while spreads to Bunds widened up to 130 bps in the 10-year sector, according to a report from Barclays.

The Markit iTraxx SovX CEEME ex-EU index on Wednesday widened 22 bps to Treasuries plus 242 bps. The Markit iTraxx Crossover index spread - seen at 457 bps on Tuesday - widened to 479.5 bps.

"Overall limited activity as concerns over Europe reemerge and investors await Friday's non-farm payrolls numbers," the analyst said. "In Turkey, long-end sovereign cash is 3 points down with the curve 20 bps to 30 bps wider. Turkish banks have also seen selling."

Sovereign bonds from Ukraine were seeing some strong bids by mid-week, said Svitlana Rusakova of Dragon Capital.

"While a few of them got hit, it stood quite strong overall," she said. "In the quasi-sovereign space we saw good demand for banks and Naftogaz. Cautiousness remains, but it seems like a bit of new money came into the market."

In other news on Wednesday, Korea National Oil Corp. priced an issue of Swiss franc-denominated notes, and the new two-tranche issue of bonds from Nigeria saw some action.

KNOC prints notes

In its new deal, Korea National Oil sold CHF 240 million 1 5/8% notes due 2018 at 100.246, a market source said.

Credit Suisse, BNP Paribas and UBS were the bookrunners for the deal.

Korea National Oil is an oil and gas production and exploration company based in Anyang, South Korea.

Nigeria deal gets attention

The new two-tranche issue of $1 billion notes due in 2018 and 2022 from Nigeria was somewhat active in trading on Wednesday.

"The 2018s are trading the heavier of the two," the London analyst said.

The 2018s were seen early in the session at 99 after pricing at 98.917 to yield 5 3/8%. As the day went on, the notes moved to 98 3/8 bid, 98 5/8 offered and 98 3/8 bid, 98¾ offered.

"Plenty of flippers and semi-pros looking to sell their 2018s, which traded heavy in the morning before coming back this afternoon," a trader said.

From there the notes shifted to 98 5/8 bid, 99 offered before moving to 98½ bid, 98 7/8 offered.

The low of the day was 981/4, and the high was 98.917.

Nigeria's 2023s a bit better

Nigeria's new notes due 2023, which came to the market at 98.193 to yield 6 1/8%, traded on Wednesday morning between 98.35 and 98.85.

Later in the morning the notes moved to 98 3/8 bid, 98 7/8 offered. By early afternoon in Europe, the 2023s were quoted at 98½ bid, 99 offered. They stayed at that level for much of the afternoon.

"The 2023s traded a little better," a trader said. "They closed at 98.60 bid, 99 offered, 7 bps wider."

Citigroup and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to finance infrastructure investments.

Afrexim dips

As the military moved to remove Egyptian President Mohamed Morsi from power, Cairo-based African Export-Import Bank's (Afreximbank) recent $500 million 5¾% notes due 2016, which priced at par, moved to 104.62 bid, 105.37 offered on Wednesday.

On Tuesday the notes were quoted at 104¾ bid, 105¾ offered.

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

Middle East in focus

From the Middle East, Jebel Ali Free Zone's (Jafza) 2019s opened unchanged on Wednesday at 108.62 bid, 109.62 offered after a busy session the previous day, a trader said.

The 2021 and 2023 notes from Abu Dhabi National Energy Co. (TAQA) were 10 bps wider on the day.

Qatari Diar's 2015s were holding firm at 103 5/8 bid, 104 1/8 offered, about 10 bps tighter on the week, he said.

Qatar-based Ooredoo QSC, formerly known as Qtel International, saw its 2043s close on Wednesday at 88 bid, 89 offered after trading near 90 on Tuesday, a trader said.

And Qatar's 2023s were spotted Wednesday at 97.06 bid, 97.56 offered after Tuesday's levels of 96 7/8 bid, 97¼ offered.

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