Gazprombank prices 10 billion rubles; Indonesia roadshows 30-year deal; funds see sixth straight inflow

By Paul Deckelman and Paul A. Harris

St. Louis, Feb. 5 - Prices for Asian cash bonds improved and the benchmark Brazil 2040 bonds firmed during a Monday session which saw Russia's Gazprombank price a 10 billion ruble eurobond issue.

Meanwhile dedicated emerging markets bond funds saw their sixth consecutive weekly inflow.

And the forward calendar of sovereign, quasi-sovereign and corporate deals continued to build.

Gazprombank prices 10 billion rubles

Gazprombank, Russia's joint-stock bank of the gas industry, priced a 10.0 billion ruble issue of three years plus one day senior unsecured eurobonds at par to yield 7¼% on Monday, according to an informed source.

The issue priced on top of price talk.

ABN Amro and Barclays Capital were joint bookrunners for the Regulation S issue.

Indonesia roadshows

Meanwhile the Republic of Indonesia (B1/BB-/BB-) is expected to price a benchmark-sized offering of dollar-denominated global bonds due 2037 during the middle part of this week via Citigroup, Deutsche Bank and UBS.

Indonesia last priced dollar-denominated bonds when it completed a $2 billion two-tranche deal during March 2006.

Improved outlook in Indonesia

Indonesia was the overarching story of the day in the secondary market.

A pair of outlook revisions by major ratings agencies gave a boost to the bonds of the countries involved and, to a lesser extent, to their overall regional markets.

In Asia, market participants reacted favorably to the news that Moody's Investors Service had revised its ratings outlook on Indonesia to positive from stable previously, citing the oil-rich South Asian nation's steady improvement in its debt-to-GDP ratios and its external debt position.

On the other side of the world, a similar outlook revision from Fitch Ratings gave Brazil's bonds a boost.

Moody's said over the weekend that it was upping the outlook on Indonesia's B1 foreign and local currency ratings for the country's government bonds, its Ba3 foreign currency ceiling for bonds and its B2 foreign currency country ceiling for bank deposits.

It cited the progress which Jakarta has made in recent years in reducing the ratio of its debt as an overall percentage of its gross domestic product, helped by the increase in GDP as the economy grows.

The positive news on the ratings front comes just at the right time for Indonesia, as the country is preparing to bring its mega-deal, worth perhaps $2 billion, to market

A New York-based trader in Asian debt said that the outlook revision "definitely supported Indonesia in particular and the overall [Asian] market generally."

He said that "we saw CDS spreads move 2 or 3 basis points [tighter] in Asia on the news, and then they moved another basis point or two here on the back of that," as well as on the back of market strength generally.

On the cash-bond side, he saw prices up about 3/8 point over the kind of closing levels seen Friday, helped by the ratings agency news on Indonesia, as well as "the same trends that we saw late last week," when spreads tightened in line with gains in the U.S. Treasury market following the Federal Reserve decision to leave the key borrowing rate unchanged at 5.25%, Fed statements following the central bank's monthly meeting indicating that the governors see the American economy continuing to improve but do not see an imminent upsurge in inflationary pressures, and subsequent U.S. economic data that seemed to bear that assessment out.

The trader said that "very positive market fundamentals" were at work.

He also said that at his shop, they had seen "not huge client buying, but consistent client buying, especially in the Philippines and, to a lesser extent, in Indonesia, obviously with the deal [the roughly $2 billion of global bonds expected to price around mid-week] coming - but the overall tone is still firm.

The Indonesia ratings news "certainly had the biggest impact on the market," although "essentially it's been a pretty quiet session across most [individual-country] markets.

Noting the spread tightening and the continued firmness, even with the prospect of the big new Indonesian bond at mid-week, "the market has been rallying into the supply. It's a pretty solid indicator."

Brazil benefits from ratings move

In the Latin American market, Fitch revised its outlook on Brazil's BB credit rating to positive from stable, with the agency's managing director for Latin American sovereign ratings, Roger Scher, declaring that "the rapid improvement in Brazil's external balance sheet, notably its shift in 2006 to being a net public external creditor, raises the likelihood of an upgrade over the next two years," that is, "as long as public finances do not deteriorate."

Brazil's global bonds due 2040 firmed by 0.437 point, to 132.625 bid.

Investors wonder about Argentina's accounting

Elsewhere in a Latin market where a trader said "not much" was happening,

Argentina's inflation-linked peso bond yields rose on investor suspicion that the government may have been cooking the books to make inflation appear to be under control.

The yield on the country's inflation-linked bonds due 2033 was up 6 bps to 5.37%.

Published reports quoted analysts and other market-watchers voicing concern that Buenos Aires has been manipulating the inflation data for political purposes.

The government - after several hours delay from the time that the numbers had been officially scheduled for release on Monday - said that January inflation came in at 1.1% - well below economists' expectations of at least a 1.4% rise.

The figures, as well as the circumstances of their belated release, are expected to continue to fuel the debate over whether the data has been doctored.

Bond fund inflows continue

Meanwhile, investors continued to put money into emerging market bond funds, according to data released Monday by Emerging Portfolio Fund Research. In the week ended Thursday, Feb. 1, high yield bond funds saw their sixth straight week of net inflows - their best run since Emerging Portfolio Fund Research started tracking these funds on a weekly basis in the fourth quarter of 2004. Helped by renewed enthusiasm for airline and construction debt, the funds have absorbed $1.04 billion year-to-date compared to $32.4 million for the comparable period last year.

Emerging Portfolio Fund Research said that emerging markets bond funds extended their streak of net inflows to 18 straight weeks, although the $94.8 million that investors committed was the smallest weekly total so far this year. And it said that global bond funds have now taken in fresh money for 24 straight weeks as investors parked another $305 million in these funds.

The organization further noted that collective flows into all the bond funds it tracks are at 157% of those a year ago.

Banks line up deals

During the opening session of the Feb. 5 week, three familiar names from the banking sector unveiled dollar-denominated deals.

From the quasi-sovereign sector, State Bank of India (Baa2/BBB-/BBB-) is expected to launch a dollar-denominated two-part notes offering in the near future, pending market conditions.

The New Delhi-based state-run bank is in the market with a tranche of five-year senior notes and a tranche of hybrid tier I perpetual notes.

Barclays Capital, Citigroup, Deutsche Bank and HSBC have been mandated to lead the deal.

Elsewhere, Alfa Bond Issuance, a financing unit of Russia's Alfa Bank, will start a roadshow next Monday in Hong Kong for its dollar-denominated offering of 10-year lower tier II subordinated loan participation notes via Dresdner Kleinwort and JP Morgan.

Moody's assigns its Ba2 issuer rating to privately owned, Moscow-based Alfa Bank. The Standard & Poor's issuer rating for Alfa Bank is BB.

Also from Russian banks, SB Funding Ltd., a subsidiary of Russia's Bank Soyuz, gave 9 3/8% price guidance on its dollar-denominated offering of three-year loan participation notes, (expected ratings B1/B-).

ING is leading the deal, the size of which remains to be determined.

Latin American corporates

The emerging markets forward calendar also took aboard a pair of prospective corporate deals from Latin America.

Chile's Sociedad de Inversiones Calichera (Pampa Calichera), a specialty chemicals and fertilizers producer, will begin a roadshow Tuesday in London for its $250 million offering of 15-year senior secured amortizing notes (expected BB-).

Deutsche Bank has the books for the debt refinancing, share repurchasing and general corporate purposes deal from the Santiago-based company.

Meanwhile from Brazil, Fabrica De Prods Alimenticios Vigor SA will begin a roadshow on Tuesday for its $100 million offering of notes (B2) via Dresdner Kleinwort.

Vigor is one of Brazil's largest nationally owned conglomerates in the dairy and vegetable oil products segments.

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