Emerging markets CDS tighten; Cayman Islands prices; El Salvador and ICICI set price talk

By Christine Van Dusen

Atlanta, Nov. 19 - Investors continued to toggle between feelings of risk aversion and risk tolerance on Thursday, as evidenced by an across-the-board tightening of five-year credit default swaps after a Wednesday that saw mostly widening, according to market sources.

Argentina five-year CDS closed Thursday at 952.305 bps mid, 24.05 bps tighter. Brazil closed at 119.645 bps mid, 1.96 bps tighter. Russia ended the day at 181.48 bps mid, 0.635 bps tighter, while Mexico closed at 140.27 bps mid, 1.385 tighter. And Venezuela finished Thursday at 1,084.56 bps mid, 5.82 tighter.

Among corporate, OAO Gazprom closed at 234.135 bps mid, 0.435 bps tighter, and Russia's VTB Bank closed at 335.81 bps mid, 1.805 tighter.

"There's a little bit of uneasiness. It all goes back to the same risk tolerance, risk aversion paranoia that's affecting the market," according to Enrique Alvarez, a debt strategist with think tank IDEAglobal.

JP Morgan's benchmark EMBI+ index has been gyrating between 300 basis points and 315 to 320, he said, with a level of 310 bps as of mid-day Thursday. "It's a back-and-forth market in that sense," he said.

In primary news Thursday, The Government of Cayman Islands priced $312 million 10-year notes to yield 5.95%, or Treasuries plus 261.6 bps, according to a market source.

And investors continued to await word on pricing for Poland-based beverage producer and distributor Central European Distribution Corp.'s planned €580 million equivalent in dollar- and euro-denominated senior notes.

Two issuers set price talk, with El Salvador setting guidance on a benchmark-sized, dollar-denominated issue of 10-year notes at 7 5/8% to 7 ¾%, and India's ICICI Bank talking its $500 million to $1 billion notes at Treasuries plus 350 bps, market sources said.

Also on Thursday, Brazil's Petrobras International Finance Co. continued to be actively traded, according to a market source who was looking at data from Trace.

Petrobras, an energy company based in Rio de Janeiro, recently priced a benchmark-sized offering of dollar-denominated notes in 10- and 30-year tranches, with $2.5 billion of 5.75% notes due January 2020 to yield 5.875% at a spread of 238.5 bps to Treasuries and $1.5 billion of 6.875% notes due January 2040 to yield 7% at a spread of 270.6 bps to Treasuries.

As of mid-afternoon, the 10-year tranche saw $70.5 million traded at a spread of Treasuries plus 175 bps, versus $32.8 million at Treasuries plus 218 bps by midday Wednesday. The 30-year tranche had $25 million changing hands by Thursday afternoon at a spread of Treasuries plus 240 bps. There were no Tuesday or Wednesday levels available for comparison. On Monday those bonds traded $20 million at Treasuries plus 240 bps.

Thursday also saw a rise in inflows for emerging market bond funds, according to data service EPFR.

The funds took in $963.9 million for the week, just shy of the record for the year so far of $969.8 million on Oct. 14, according to data service EPFR. Emerging market local currency funds experienced inflows of $434.2 million, a stronger showing than in emerging market local currency bond funds, which took in $388.4 million. The funds that are a blend of the two took in $141.4 million.

"The local currency bond fund inflow is the largest this year and the largest in U.S. dollar terms on record," according to Brad Durham, managing director at EPFR. "As a percent of total assets, though, it's the biggest since October 2006. Flows pick up into local currency funds as a way to sidestep U.S. dollar weakness."

Cayman Islands prices $312 million

The Cayman Islands (Aa3) priced $312 million of fixed-rate bullet notes due Nov. 24, 2019 at par to yield 5.95%, or Treasuries plus 261.6 bps, according to a market source.

HSBC was the bookrunner for the Rule 144A and Regulation S deal.

The yield came in line with guidance that was revised earlier Thursday to 5.95% from the original 6% to 6 1/8%.

Proceeds will be used to repay outstanding bridge financing.

El Salvador talks 10-year notes

The Republic of El Salvador set price guidance on a benchmark-sized, dollar-denominated issue of 10-year notes (Ba1/BB/BB) at 7 5/8% to 7¾%, according to a market source.

The bookrunners for the Rule 144A and Regulation S deal are Citigroup and JP Morgan.

Proceeds will be used for refinancing.

ICICI talks $500 million to $1 billion notes

India's ICICI Bank Ltd. set price talk for its planned issue of $500 million to $1 billion senior unsecured fixed-rate notes (Baa2/BBB-/) due March 2015 at Treasuries plus 350 bps, according to a market source.

The bookrunners for the Rule 144A and Regulation S issue are Bank of America Merrill Lynch, Credit Suisse and HSBC.

Proceeds will be used for general corporate purposes.

ICICI Bank currently faces an "asset quality challenge," according to Moody's, "given the growing trend in loan delinquencies in India as a result of the economic slowdown and the seasoning of the bank's retail loan book."

ICICI Bank is a commercial bank based in Mumbai.

AK Bars plans 10¼% notes

AK Bars Bank subsidiary AK Bars Luxembourg SA plans to issue dollar-denominated 10¼% notes due 2012 for cash alongside similar securities to be issued in exchange for its $250 million of 8 ¼% loan participation notes due 2010.

Credit Suisse is the bookrunner for the new notes, which are expected to launch prior to or on the settlement date for the exchange offer, which is planned for Dec. 9.

AK Bars is a bank based in Kazan, Republic of Tatarstan, in Russia.

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