Emerging market debt firmer on equities; Jamaica sells upsized $350 million bond deal

By Reshmi Basu and Paul Deckelman

New York, March 8 - Emerging market debt moved higher Thursday amid upbeat trading, propelled by a stronger gain in the U.S. stock market.

Meanwhile Jamaica decided Thursday to test investors' appetite for risk as the country tapped the capital markets. And sources noted that the sovereign was not disappointed as the size of the deal was increased to $350 million from $250 million.

On Thursday, the country sold $350 million in amortizing notes due 2039 (B1/B/B+) at 98.592 to yield 8 1/8%.

The deal came at the low end of guidance for a yield in the area of 8¼%.

New supply from sovereigns has been rare this year. And volatile conditions have kept issuers at bay over the last week. That has meant Jamaica benefited from the scarcity of new supply and the hunger for yield. Market sources described the new deal as very well timed and well priced

"It has been doing great," remarked a sellside source, who added that new notes saw heavy liquidity.

"It was announced at a very good spread to the [4.75% Treasury due February 2037]. That drove investors to the market."

Meanwhile the new deal traded up in the secondary, spotted at 99.80 bid, 100.05 offered.

Citigroup was the bookrunner for the Securities and Exchange Commission-registered offering of notes.

GOL, Alfa, Absolut plan deals

In other pipeline news, Sao Paulo, Brazil-based low-cost airline company GOL Linhas Aereas Inteligentes plans to start a roadshow for a $200 million offering of 10-year bullet bonds (//BB+) next week.

Marketing will begin in London on Monday, March 12, then move to Switzerland on Tuesday, March 13, followed by New York on Wednesday, March 14, Boston and Philadelphia on Thursday, March 15, and wrapping up in Los Angeles on Friday, March 16.

The bonds will be non-callable.

Morgan Stanley is the bookrunner for the Rule 144A and Regulation S deal, which will be issued via GOL Finance, a Cayman Islands-based subsidiary.

Elsewhere, Russia's Alfa Bank plans to sell an offering of notes denominated in either euros or dollars (Baa3) under its Alfa Diversified Payment Rights (DPR) program.

There will be simultaneous investor presentations held next week in both Europe and the United States.

Dresdner Kleinwort and Merrill Lynch are lead managers for the Rule 144A and Regulation S transaction.

Also out of Russia, Absolut Bank plans to sell a benchmark-sized offering of eurobonds.

A roadshow is scheduled to start in Hong Kong on March 15, then Singapore on March 16, followed by Athens on March 19, next Geneva and Zurich on March 20 and wrapping up in London on March 21.

Dresdner and UBS will manage the Regulation S transaction.

Pricing will take place following the completion of the roadshow, subject to market conditions.

EM firmer on equities

Risk aversion appears to have eased, following a week-long rout in global financial markets.

The search for yield helped bond prices move higher Thursday as spreads on the JP Morgan EMBI Index tightened by three basis points.

"The investment options are limited and liquidity seems to be unlimited, so you have to put your money somewhere," noted the sellside source.

"A lot of people were concerned about the sub-prime [mortgage] market in the U.S., which has taken a lot of people of guard, but there are still many options out there where you don't have a underlying asset, you have an underlying credit or country where the views are a lot of better."

Among benchmark names, the bellwether Brazilian bond due 2040 added 0.05 in trading Thursday to 133.85 bid, 133.90 offered. The Russian bond due 2030 gained 0.25 to 113.625 bid, 113.75 offered. The Turkish bond due 2030 moved up 0.37 to 152 bid, 153.125 offered.

Asia posts strong session

A New York-based trader in Asian issues said that his sector had enjoyed "a pretty strong day, for the most part, following a very strong overnight equity session in Asia," where stocks continued for a third straight session to bounce back from the giant plunge touched off last week by a slide in the Chinese bourse.

He said that ever since Tuesday, EM bonds had been "highly correlated to the performance of Asian equities. Given that the Nikkei and the Hang Seng [stock indexes] were all up a few points, the market opened very strong here, and given that equities stayed strong [in the U.S.] for the majority of the day,"

Philippine and Indonesian sovereign cash spreads tightened by 5 to 7 basis points "across the board."

In the CDS market, he saw the five-year contract on Philippine debt at 124-127 bps, and on Indonesia at 122-125, a tightening of about 7 basis points from Wednesday's levels, indicating that investors feel the underlying debt is less risky than previously.

Hutchison sees bids

In corporate trading, he saw Hutchison Whampoa Ltd.'s 2033 bonds "decently bid after widening out overnight," closing at 143 bps bid, 141 bps offered, versus the 146 bps spread versus comparable Treasuries seen overnight. He noted that the Hong Kong-based conglomerate's '33s "are more or less the surrogate for Asian high-grade, and serve as a pretty strong sentiment indicator for the overall high-grade market."

In other Asian corporate news, another trader saw MagnaChip Semiconductor Ltd.'s 8% notes due 2014 down 2 points to 67 bid, 68.5 offered. He did not see any fresh news out on the South Korean computer chip manufacturer, but offered that the bonds "have been tanking all this past week."

Ecuador tightens

In Latin American bond dealings, yields on Ecuador's bonds narrowed after that country's economy minister said Quito will probably make its next debt interest payment, backing off previous threats to default.

The spread on its bonds narrowed by 6 basis points to 711 bps over Treasuries, the lowest levels since Feb. 26. The yield on its 10% benchmark dollar notes due 2030 narrowed by 31 bps to 11.75%, also the lowest since Feb. 26. That bond's price was up 2 points to 86.1.

Looking ahead, emerging investors will be focused on Friday's release of non-farm payroll numbers in the United States for further evidence as to the health of the U.S. economy.

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