EM tone improves; China Great Wall outperforms; Eesti Energia eyes notes; roadshows ahead

By Christine Van Dusen

Atlanta, June 17 – Emerging markets investors started to come out of their shells on Wednesday after comments from German Chancellor Merkel – which helped calm some fears about the ongoing economic turmoil in Greece – and following the Federal Open Market Committee’s decision to keep rates steady.

“Merkel stated that she was prepared to do ‘everything possible to keep Greece in the euro zone,’” according to a report from Barclays Capital. “However, with no new proposals on the table, preparations for a possible Greek default are intensifying.”

Still, the tone improved for Asian bonds on Wednesday morning, with many names moving as much as 3 basis points tighter, amid light flows and selective demand.

“It feels like most of the rally is driven by short-covering, with high-beta names outperforming,” a London-based trader said.

The recent issue of notes due in 2018 from China Great Wall Asset Management Corp. outperformed, with the bonds moving 4 bps tighter on Wednesday morning, he said. The notes came to the market at a spread of 150 bps over Treasuries.

“Korea closed unchanged,” he said. “India is consolidating, but corporates remain heavy. Seen good two-way in short-dated financials.”

Meanwhile, Malaysia’s bonds closed the Asian session slightly tighter, with some buying interest seen for sukuk.

Also on Wednesday, bonds from Argentina dipped during the morning on the news that presidential candidate Daniel Scioli appointed Carlos Zannini, who was an aide to President Kirchner, as his running mate.

“This headline looks to be dragging on prices this morning,” a trader said. “We are about ½ point lower.”

The country’s Boden 2015s moved to 100½ from 101.10, and the Bonar 2024s moved to 96½ from 98.10.

Lat-Am tightens

In other trading from Latin America, spreads moved tighter after the FOMC comments, closing nearly unchanged on the day, a New York-based trader said.

Still, investors were slightly cautious and activity was relatively light.

Notes from Latin America-focused Pacific Rubiales didn’t move much during the session, he said, as bigger clients remained on the sidelines.

Taking a closer look at Asian bonds, sovereign notes on Wednesday were better bid during the afternoon, a trader said.

“Asia high-yield was stronger on the property front and steady in the industrial front,” he said.

Ukraine bonds dip

In other trading, bonds from Ukraine have so far this week ticked lower, with the 2017s moving down about ½ point, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

Quasi-sovereigns from Ukraine have seen light flows, he said.

Investors are now looking ahead to the forecasts from the Federal Open Market Committee and a press conference from Federal Reserve Chair Yellen.

“We expect an upgrade in the description of the economy in paragraph one of the statement, although the committee may still be cautious in its description of consumption,” Barclays said in its report.

Posadas sets roadshow

Mexico’s Grupo Posadas SAB de CV will set out on Thursday for a roadshow to market a dollar-denominated issue of notes, a market source said.

Citigroup, BofA Merrill Lynch and JPMorgan are the bookrunners for the Rule 144A and Regulation S deal.

The roadshow will start in Los Angeles and travel to London and Boston before concluding on June 24 in New York.

Grupo Posadas is a hotel chain based in Acapulco, Mexico.

DBS Bank plans marketing trip

Singapore’s DBS Bank Ltd. will depart on June 22 for a roadshow to market a $10 billion global bond program, a market source said.

Barclays, Citigroup and UniCredit are coordinating the marketing trip.

DBS Bank is a Singapore-based financial services group

Deal ahead for Eesti Energia

In other deal-related news, Estonia-based utility Eesti Energia AS is looking to issue euro-denominated notes, a market source said.

And industry-watchers were whispering about a possible $1 billion bond from Abu Dhabi’s Etihad Airways PJSC and an issue from Zambia, both during the third quarter of this year.

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