Emerging markets feeling stronger; primary still rolling; Fraser & Neave prices S$250 million

By Aaron Hochman-Zimmerman

New York, April 15 - Emerging markets tightened on Treasury action while investors continued to support an elevated optimism over trading and more confidence in the new-issue market.

"The market is doing good, CDS is tightening," a syndicate desk official said Tuesday.

In the primary, Singapore's Fraser & Neave Ltd. priced S$250 million to move the broader market's pricing streak to three days.

The market felt more dependable, a trader said, adding that the primary will continue to open to major issuers if conditions are allowed to progress.

On a rocky day in equities, volatility was higher early but trailed off after midday to end lower by 1.04 at 22.78, according to the VIX index. The index is a commonly used gauge of market volatility.

Treasuries were pushed back on Tuesday, which allowed emerging markets to wind tighter by 10 basis points to a spread of 275 bps, according to the EMBI+ index. The EMBI+ estimates the amount of extra yield investors will demand to hold assets in emerging markets debt.

LatAm quietly tighter

Latin American trading showed a tempered but positive tone as spreads tightened during a quiet session, a syndicate official said.

In Brazil, the state oil company Petroleo Brasileiro (Petrobras) said its offshore oil discovery in the "reserves at the Carioca field, in the Santos Basin, may be five times bigger than those found in the Tupi field," according to Petrobras' press release.

The field may contain up to 33 billion barrels, but the exact size is still being examined, the release said.

The Brazilian 11% sovereign bonds due 2040 were lower by only 0.05 point to 135.9 bid.

Also concerning oil, many of Mexico's left-leaning politicians are still occupying the legislature since they stormed the podium in both houses last Friday.

The group is protesting the bill proposed by president Felipe Calderon, which would allow foreign investors access to the state oil firm Petroleos Mexicanos SAB de CV (Pemex).

The constitution requires Pemex to remain in public hands, but Calderon hopes to allow it to be able to make more decisions internally about the awarding of contracts and its budget.

The opposition is demanding a comprehensive debate over the issue.

Light sweet crude reached $113.80 per barrel on Tuesday.

The 5 5/8% Mexican government bonds due 2017 were quoted at 106 bid.

Also, Venezuela's 9¼% bonds due 2027 were unchanged at 96.7, while Colombia's 7 3/8% bonds due 2037 were seen at 111.25 bid.

'Working agenda' set in Argentina

In Argentina, "a working agenda has been set" after a meeting between cabinet chief Alberto Fernandez and representatives of the country's farmers, according to the Buenos Aires Herald.

Meetings are scheduled to continue in order to avoid another work stoppage, which led to blockaded highways and food shortages.

The 8.28% Argentine discount bonds due 2033 sank 1.25 point to 83 bid.

Fraser & Neave prices S$250 million

The pricing streak in the primary market hit its third day as Fraser & Neave Ltd. priced S$250 million three-year notes with a coupon of 3.38%.

DBS Bank and HSBC acted as bookrunners for the notes, which were priced from Fraser & Neave's S$2 billion medium-term note program.

Proceeds will be used to refinance existing debt.

The issuer is a Singapore-based bank and real estate developer.

Meanwhile, Brazil's Banco Industrial e Comercial SA (Ba1) talked its dollar-denominated two-year offering in the 7% area.

BB Securities and Banco Votorantim will act as bookrunners for the deal, which will come from the bank's $1 billion medium-term note program.

The bank held a non-deal roadshow in Europe and the United States from Jan. 17 to Jan. 21.

Bicbanco is a Sao Paulo-based commercial and investment bank.

Also in Latin America, Argentina's Telefonica Moviles Argentina SA's directors have approved the issue of up to $400 million of notes. The notes will be issued under the company's $1.5 billion note program.

Telefonica Moviles is a Buenos Aires telecommunications provider.

In sovereigns, the Republic of Hungary announced its plans for a Swiss franc-denominated sovereign.

ABN Amro and Credit Suisse will act as bookrunners for the offering.

Proceeds will be used for general financing purposes.

New issues will likely pick up if the market remains as it has been over the last few sessions, a trader said.

The upcoming issues will likely be from Brazil and likely from banks, a syndicate source said.

Asia feeling good, trading light

Asian trading "was not by any stretch euphoric, but it was constructive," a trader said, although volumes remained light.

"There wasn't anything that stood out," he said.

"Clients are confused over where we're heading medium term," he said, adding that investors may be ready to jump back in when there is more consistency.

In the Philippines, soaring commodity and food prices have made wage increases both necessary and difficult, the National Economic and Development Authority (NEDA) said, according to the Manila Times.

In 2007 a 12% increase to the minimum brought the daily level to PHP 362 in metropolitan Manila, the report said, but the Trade Union Congress has requested another PHP 80 increase per day.

Meanwhile, the country's income from workers overseas was up 16% in February to $1.3 billion, making the yearly total $2.5 billion, according to the central bank.

The number of skilled workers has increased in the past year, the bank said.

"In 2007, the Philippine Overseas Employment Administration (POEA) reported that the number of deployed new hires in the fields of engineering, medical/health care, education, and food/hotel service, rose compared to the levels in the previous year," the bank said.

The Philippines' sovereigns due 2030 held unchanged at 132.25 bid.

Also, Indonesia's Bulog, the state logistics agency, has no plans to export rice despite high commodity prices, according to the Jakarta Post.

The trade ministry recently allowed the agency to export rice to boost its profitability, but the agency said it preferred to ensure its supply for Indonesians does not dwindle.

Bulog claims it has enough rice to feed the country for four months.

The Indonesian government bonds due 2017 slipped by 0.25 point to 104.25 bid.

Pakistan digging for pipeline

Meanwhile in Pakistan, president Pervez Musharraf asked China to connect the Persian Gulf states with China through Pakistan, according to the BBC.

A pipeline would have to travel through very difficult mountainous terrain, Musharraf admitted, but "technically it's very feasible," he said.

The Pakistani government bonds due 2017 were better by 1.5 point to 86.5 bid.

Emerging Europe tightens

Trading in emerging Europe felt stronger while spreads tightened on Treasury weakness.

In Ukraine, president Viktor Yushchenko said that the corruption in the country is a threat to national security, according to the Itar-Tass News Agency.

"Corruption has gone so far that it is taking away the future from our state," Yushchenko said at a press conference.

"How come we do not have the proper statistics, criteria and legislation?" he asked.

"Our task is to find the motivation in order to fight corruption effectively, to unite in the drive for a common cause and to resist this ill," he added.

In Turkey, the agriculture sector is struggling through a more difficult downturn than it faced during the 2001 crisis, said Ibrahim Yetkin, chairman of the Turkish Association of Agriculturalists (TZD), according to the Turkish Daily News.

Agriculture production slipped 7.3% in 2007 compared to 6.1% in 2001.

The damage came from both the 2007 drought as well as poor agricultural policy, Yetkin said in the report.

Yetkin said the European Union designates 40% of its budget for agricultural subsidies while only 2.5% of Turkey's budget goes to farmers.

Also in emerging Europe, the European Union has struck a deal with Turkmenistan to bring 10 billion cubic meters of Turkmen natural gas to the continent.

The gas is scheduled to be transported through the proposed Nabucco pipeline, which will run from Turkmenistan underneath the Caspian Sea, through Turkey into Bulgaria.

The pipeline is expected to be operational in 2013, according to the BBC.

The pipeline will have a capacity of 31 billion cubic meters per year, which represents only 5% of the European Union's annual requirement.

Putin to lead United Russia party

In Russia, president Vladimir Putin accepted a new role as chairman of his United Russia party.

Putin has stated his intention to remain influential in Russian politics after his successor Dmitry Medvedev is sworn in on May 7.

Medvedev, as the new head of state, turned down an invitation to join the party.

However, "as for the chairman of the government [prime minister], a situation in which the head of the executive branch leads a party is a civilized and natural practice that is traditional for democratic states," Putin said in front of the legislature.

"Coordinated work between the government and the parliamentary majority allows us to successfully resolve the tasks of developing the economy, enhancing the quality of health care and education, raising the income of the population and strengthening the country's defense," he added.

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