Emerging markets mixed, slow; Argentina battered again; Roadshows to begin Tuesday

By Aaron Hochman-Zimmerman

New York, June 16 - Emerging markets turned in a mixed day as Treasuries backed off slightly on the U.S. side.

Tiger Woods may have put on the big show of the day in the U.S. Open, but inflation was again on the radar screen in emerging markets. Turkey opened the week with a 50 basis point rate hike, leaving its borrowing rate at 16.25%.

In trading, the government and farmers were still at loggerheads in Argentina, where the benchmark discount bonds due 2033 dropped 1.5 points.

The primary market saw new deals enter the pipeline, but investors looked ahead to Tuesday when benchmarks are expected from energy interests such as Russia's OJSC Gazprombank and Kazakhstan's JSC NC Kazmuaygas.

Generally the market survived a shock Monday, a syndicate desk official said, as a record oil price still left most credits in tact.

The week looks like it may prove to be positive, he said.

Meanwhile, another mixed day for equities left volatility slightly lower by 0.27 at 20.95, according to the VIX index. The index is a frequently used gauge of market volatility.

The flat day only moved emerging markets out by 1 basis point to a spread of 242 bps, according to JPMorgan's EMBI+ index. The EMBI+ estimates the amount of extra yield investors will require to keep assets in emerging markets debt.

Emerging Europe starts strong

Emerging Europe turned in a relatively strong performance to open the week with mild tightening and better prices for the benchmarks.

Russia's sovereigns traded better on Monday as oil prices were fast out of the gate to set a new record.

Still, prices, which hit $139.89 per barrel, trailed off to $133.50 per barrel later in the day.

"The thing that surprised me was oil," a syndicate source said, unsure of what caused the drop in price.

Also in Russia, prime minister Vladimir Putin said he plans to add funding to World Bank programs including "development, the fight against poverty, and support to globalization," Putin said, according to the Itar-Tass News Agency.

"It is important that this globalization does not make the poor even poorer and the rich even richer," he said.

Putin made the comments after a meeting with World Bank president Robert Zoellick.

The Russian sovereigns due 2030 added 0.25 point to 113 bid.

Also in the Commonwealth of Independent States, Ukraine president Viktor Yushchenko welcomed a secretary-general Jaap de Hoop Scheffer and a NATO delegation in order to discuss Ukraine as a potential member of the alliance.

The president is strongly in favor of membership, but protests by nationalist parties echoed objections from Moscow to the expansion of NATO.

Elsewhere in Bosnia-Herzegovina, ministers are close to signing a stabilization and association agreement that would represent the early stages of applying for membership in the European Union, the BBC reported.

It may still be many years before the country is at the doorstep of E.U. candidacy, but many were encouraged by its progress toward the international stage.

Miroslav Lajcak, a Slovakian who serves as the country's internationally appointed high representative, said that movement toward membership will help combat ethnic tensions.

Turkey ups rates 50 bps

Meanwhile in Turkey, the central bank announced a 50 bps rate hike to the borrowing rate, pushing it to 16.25% as well as a lending rate hike to 20.25% from 19.75%.

The accompanying statement focused more blame for inflation on supply side shock rather than food and fuel costs, the source said.

The central bank ended by saying it would consider further rate hikes as they become necessary.

The lira was seen trading at 1.241 to the dollar.

Also, a merger of state-owned banking giants Halkbank, Vakifbank and Ziraat Bank with Isbank would create an internationally competitive "super bank," said Coskun Ulusoy, the chairman of Turkey's powerful military pension fund, according to the Turkish Daily News.

Ulusoy serves as the chairman of Oyak, which just sold Oyakbank to ING for $2.7 billion.

The money from the sale is expected to be put into future acquisitions.

Some political opposition to the deal is expected to surface, but Ulusoy said: "Nothing is impossible if there is political will."

The Turkish sovereigns due 2030 added 0.5 point to 146.25 bid.

Also in the European time zone, in the United Arab Emirates the U.K. foreign office issued a warning to British nationals that there is a risk of terror attacks in a country which has largely been untouched by terrorism, according to the BBC.

The foreign office is not known to elaborate about warnings but posted on its web site: "There is a high threat from terrorism. We believe terrorists may be planning to carry out attacks in the UAE."

Firefight rumored in Georgia

In Georgia, Russian news services reported small arms exchanges between South Ossetian police and unidentified gunmen in Georgia on Saturday.

When the hour-long skirmish ended, two civilians and an interior ministry officer on the South Ossestian side were hospitalized.

Sunday, South Ossetian interior minister Mikhail Mindzayev accused the Georgians of improperly occupying roads in the conflict zone.

Meanwhile, a delegation from the United States landed in Abkhazia to revive talks between the Abkhaz and Georgian authorities that failed in 2006.

Brazilian issuers emerge with deals

Corporate issuers from Brazil started the ball rolling for their own new offers on Monday while roadshows were set to begin on Tuesday, including shows for OJSC Gazprombank and JSC NC Kazmuaygas.

"Energy has been the theme of the year," a syndicate official said.

"The energy sector has an abnormally high level of issuance," he said.

Still, Brazil's Camil Alimentos SA (Ba3/BB-/) announced plans to offer a $150 million senior unsecured bullet bond, according to a market source.

ABN Amro and Banco Santander will act as bookrunners for the deal.

A roadshow will be held on June 18 in Hong Kong, on June 19 in Singapore, on June 20 in Geneva, on June 23 in London, on June 24 in New York, on June 25 in Boston and on June 26 on the U.S. West Coast.

Proceeds will be used to refinance existing debt from the acquisition of Uruguay's Saman, a rice producer.

Camil is a Sao Paulo-based food producer.

Also from Brazil, Lupatech SA (Ba3/BB-) announced it will reopen its 9 7/8% perpetual senior unsecured notes, according to a market source.

Citigroup and Merrill Lynch will act as bookrunners for the deal.

A roadshow will be held in Singapore on June 17 and in Hong Kong on June 18. A roadshow in the United States and Europe is expected to follow.

The bonds from the original $200 million issue are callable beginning in 2012.

Lupatech is a Caxias do Sul, Brazil-based industrial materials manufacturer.

"I'm surprised," a syndicate official said about the appearance of a perpetual bond on the calendar.

"The perp market was pretty dead," he said, but before he is willing to declare it revived: "Let's see if this happens," he said.

Slow LatAm slips

Latin America saw light volumes with the local market closed for Flag Day in Argentina, a syndicate official said.

Spreads generally held, but prices sank in the sector to begin the week.

Venezuela was one place where trading poured a bit faster, a market source said.

Ali Rodriguez was sworn in as finance minister, replacing the outgoing minister Rafael Isea, who plans to run for governor of Aragua, Venezuela.

Rodriguez is expected to faithfully carry on president Hugo Chavez's policies, but his need to check details before answering questions about the buyback program increased the temperature of a few in the market, a source said.

"He's an insider; he's not an unknown quantity," a syndicate official said.

Upon his arrival the benchmark 9¼% government bonds due 2027 fell 0.65 point to 95.35 bid.

The 5 3/8% PDVSA bonds due 2027 were quoted at 57.5 bid, 58 offered.

Also, in Brazil the 11% sovereign bonds due 2040 dropped 0.3 point to 132.5 bid.

Strikes follow arrests

In Argentina, strikes were on again after agriculture activist Alfredo De Angeli and other farm representatives were arrested, according to the Buenos Aires Herald.

De Angeli was arrested on Saturday when riot police disbanded a protest blocking a road near the border of Uruguay.

The demonstrations and roadblocks will allow milk and perishables to pass but will continue through Wednesday, the farmers said.

The 8.28% Argentine discount bonds due 2033 sank 1.5 points to 79.5 bid.

Asia slips on quiet Monday

Asian trading remained "relatively quiet," a trader said.

"CDS was slightly better offered," he said.

"Cash got hit, particularly Philly long-end," he said, adding Indonesia saw a similar performance.

Meanwhile, in the Philippines, demands for higher yields at debt auctions cut borrowing and led to a PHP 500 million shortfall of the Bureau of Internal Revenue's collection goal in May, the Manila Times reported.

The total collection of PHP 77.5 billion in May missed the goal of PHP 78 billion but bested the PHP 66.7 billion collected in May 2007.

Finance secretary Margarito Teves still expects a budget deficit of PHP 40 billion to PHP 75 billion for 2008.

The Philippine government bonds due 2030 fell 0.75 point to 128 bid, 128.5 offered.

In Indonesia, president Susilo Bambang Yudhoyono debuted seven new public works initiatives over the weekend.

At a cost of $100 million, the financing will come from the provincial government of Bali as well as the governments of Indonesia and Japan.

"We need to develop more infrastructure facilities throughout the country, including Bali, because the more facilities we have, the better our economic competitiveness," Yudhoyono said, according to the Jakarta Post.

The Indonesian bonds due 2017 slipped 0.5 point to 98.25 bid, 98.75 offered.

In Pakistan, the ambassador from Afghanistan, Mohammad Anwar Anwarzai, was told that Islamabad strongly protests comments from Afghan president Hamid Karzai on Sunday, the BBC reported.

"Afghanistan has the right of self-defense. When [militants] cross the territory from Pakistan to come and kill Afghans and to kill coalition troops it exactly gives us the right to go back and do the same," he said.

"In my view, the only way to win the war against terrorism and extremism is by showing full respect to the territorial sovereignty and non interference in each others' internal affairs," said Pakistani foreign minister Mehmood Qureshi in response.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.