Emerging markets wrap tighter; Venezuela falls, Argentina bounces; Vimpelcom prices $2 billion

By Aaron Hochman-Zimmerman

New York, April 24 - Emerging markets tightened through slow trading as Treasuries slipped.

Despite a general illiquidity in the market, sentiment was kept high by Russia's OJSC Vimpelcom, which lit up the primary scoreboard to the tune of $2 billion thanks to its pricing of two tranches of five- and 10-year bonds.

In trading, the high betas of Latin America were headed in opposite directions.

Argentina's benchmark discount bonds due 2033 improved by 1.5 points in the face of mounting political mayhem, as energy-producer Venezuela's bonds due 2027 led the retreat as oil prices slipped from their all-time highs.

Volatility fell below 20.00 during trading but crawled back to finish lower by 0.2 at 20.06, according to the VIX index. The index is a frequently used measure of market volatility.

Treasuries were brushed aside as equities rolled higher, leaving emerging markets room to tighten by 9 basis points to a spread of 262 bps, according to JPMorgan's EMBI+ index. The EMBI+ estimates the amount of extra yield investors will require to hold money in emerging markets debt.

LatAm 'relatively' better

Latin American trading posted a good performance "relatively speaking," said Enrique Alvarez, a Latin America debt strategist at think tank IDEAglobal, as Latin American equities backtracked and debt compressed to track Treasuries.

Concern spiked over Brazil's inflation as the release of the minutes from the April meeting of the central bank added fuel to the feeling that the bank will be more defensive with rates, Alvarez said.

The real was seen trading at 2.672 to the dollar, and the 7 1/8% Brazilian sovereign bonds due 2037 were lower by 0.35 point to 112.4 bid, 112.8 offered.

The presidents of Bolivia, Nicaragua and Venezuela as well as the vice president of Cuba met in Caracas, Venezuela, where they agreed to offer $100 million in food assistance to Latin America's poor.

The four also condemned the United States for encouraging the production of biofuel.

Still, "none of those countries has any money except for Venezuela," Alvarez said.

In addition, they rejected calls for independence from Bolivia's oil-rich Santa Cruz region saying it would only benefit the wealthy.

Local leaders in Santa Cruz will hold a referendum on independence on May 4.

"They can't accept that a campesino, an Indian, can be president of Bolivia," president Evo Morales told the BBC.

"There's nothing really concrete there," Alvarez said about the independence movement in Santa Cruz.

For Venezuela, a drop in oil prices below $115 per barrel pushed the 9¼% bonds lower by 1.6 points to 91 bid, 91.6 offered.

"They got terribly clobbered," Alvarez said.

Argentina gets a bounce

In Argentina, "things have not gotten any better on the agriculture versus the administration front," Alvarez said, despite an improvement of 1.5 points for the 8.28% Argentine discount bonds due 2033.

The issue was seen trading at 80 bid, 80.5 offered.

"Maybe it's short covering," he said, or "sell the rumor, buy on the news."

Whichever is the answer, "things are pretty unstable," he said.

Vimpelcom prices $2 billion

After taking a day for preparation on Wednesday, the primary came roaring back with Vimpelcom's (Ba2/BB+) $2 billion two-tranche issue.

The five-year tranche priced at par with coupon of 8 3/8%. It priced with a spread of Treasuries plus 531 bps.

The 10-year tranche was priced at par with a coupon of 9 1/8%. It priced with a spread of Treasuries plus 530 bps.

Both tranches matched the talk.

ABN Amro, Barclays, BNP Paribas, Calyon, Citigroup, HSBC, ING and UBS acted as the bookrunners for the deal.

Proceeds will be used to refinance the company's bridge facility relating to the acquisition of Golden Telecom Inc.

Vimpelcom is a Moscow-based wireless telecommunications services company.

For Vimpelcom, "$2 billion is a lot of money," a syndicate official said. "It's a good credit."

Also, the Export-Import Bank of Korea (Kexim) (Aa3/A/A+) priced an 800 million Mexican peso reopening of its 8.61% bonds due 2017. The bonds were sold at 99.23 with a spread at the rate of the Mbono due 2017 plus 100 bps.

The original 1 billion peso notes were priced on Oct. 4, 2007 and mature on Oct. 11, 2017.

Merrill Lynch was the bookrunner for the registered deal.

Proceeds from the sale will be used for general corporate purposes.

Kexim is a Seoul-based state-owned bank.

New offers follow

The pipeline produced two new deals and added two to the back of the line on Thursday, including Azerbaijan's Technikabank (B3//B-, expected) which announced plans for the issue of dollar-denominated loan participation notes.

Morgan Stanley will act as the bookrunner for the deal.

A roadshow will be held for the deal in Asia, Europe and the United States until May 1.

Technikabank is a Baku, Azerbaijan-based commercial and retail bank.

Elsewhere in Asia, Singapore's GuocoLand Ltd. established an S$800 million medium-term note program.

Citigroup will manage the program, which may issue in any currency agreed to by the issuer and the dealers.

The Singapore-based property developers will use the proceeds for general corporate purposes.

Emerging Europe firms

Slow trading in emerging Europe still saw spread tightening as the market was lead by Vimpelcom and the primary.

In Russia, ahead of a visit to Moscow, Greece prime minister Konstantinos Karamanlis said he expects to expand energy cooperation with Russia.

"Greece will consume seven billion cubic meters of gas by the end of 2015, and 80% of this gas will come from Russia," he told the Itar-Tass News Agency.

Karamanlis said the future source of European oil will be the Caspian region, which will require the completion of a joint pipeline project between Russia, Greece and Bulgaria.

"It is being realized in line with the set schedule. The international consortium that will shoulder construction and operation of the oil pipeline, has already been set up in the Netherlands and vigorously works on translating the project into life," he said.

Also, U.N. representatives of the United States, United Kingdom, France and Germany asked Russia not to interfere with Georgia's breakaway regions of Abkhazia and South Ossetia, after a closed-door meeting in New York.

Russia claims it is trying to protect the ethnic Russians living in the regions.

The Russian government bonds due 2030 slipped 0.15 point to 114.7 bid, 114.95 offered.

Meanwhile in Ukraine, president Viktor Yushchenko sees no immediate end to the rise in inflation.

"I have no feeling the month of April will be different from the previous ones," Yushchenko said, according to Itar-Tass.

"Analysis indicates the government has so far failed to cope with the task of preventing inflation growth."

The hryvna was seen trading at 4.82 to the dollar.

Now the opposition on trial?

In Turkey, the constitutional court, which is hearing the case against the ruling AK Party, may also hear a case to ban the opposition Republican People's Party (CHP) over the illegal transfer of party funds to a television station, the Turkish Daily News reported.

Prosecutors allege that the CHP transferred $4.1 million to the station, but only $3 million was officially documented.

The station's owner is known a fierce critic of the AK Party and was heard saying: "My channel is at the command of the CHP," at anti-government rallies last year, the report said.

The CHP denies any wrongdoing.

Elsewhere in Turkey, a local leader of the pro-Kurdish Democratic Society Party (DTP) was sentenced to 15 months in prison for "inciting hatred" after making comments that Kurds would take up arms against Turkey if the Turkish military attacked Kurds in Iraq, according to the Turkish Daily News.

Turkey began its ground incursions into Iraq in February.

The Turkish sovereigns due 2030 added 0.625 point and was seen at 154 bid, 154.375 offered.

Asia creeps tighter

Asian trading felt better on slow volumes as inflation and commodity prices were still a concern.

In the Philippines, the central bank did not change its 5% overnight borrowing rate or its 7% overnight lending rate.

"Depending on the movements in oil and non-oil commodity prices, inflation could settle above the 2008 inflation target range but will be within the 3.5% plus or minus 1% target range for 2009," the bank statement said.

"Core inflation has drifted upward, with the March 2008 reading at its highest level since November 2006. The pending requests for wage and transport fare adjustments could raise the upside risks to inflation coming from demand-side pressures. On the other hand, the consensus view of a prolonged slowdown in the U.S. economy, and the resulting weaker outlook for global economic growth, could reduce demand pressures and moderate price increases in global oil and non-oil commodities," the bank said.

The peso was seen trading at 41.96 to the dollar.

In Indonesia, Bank Internasional Indonesia posted a 72% jump in profits to 198 billion rupiah during the first quarter, compared to the first quarter of 2007.

The growth was pushed by a 29% increase in new loans, which hit 34.1 trillion rupiah, according to the Jakarta Post.

The Indonesian bonds due 2017 held still at 102 bid, 102.75 offered.

In Pakistan, Baitullah Mehsud, the Taliban commander accused of ordering the assassination of former prime minister Benazir Bhutto ordered his fighters to honor a truce with the government after militant Maulana Sufi Mohammad was released from prison.

The deal came with metered optimism from the United States.

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