Emerging market primary hums; Philippines sells $1.5 billion, Turkey $1 billion; trading limited

By Aaron Hochman-Zimmerman

New York, Jan. 7 - Emerging market issuers continued to exploit the current sentiment by pouring supply on eager investors on Wednesday.

"Everybody's borrowing," a trader said, "while the market feels OK."

Issuers are wary that the window that has opened "might be a really narrow one too," he said.

Even "the U.S. corporate world is crazy-busy," he said. "Sovereign governments and corps definitely need financing."

Many investors across the market-scape are beginning to worry that the recent strong sentiment is a result of people pricing in a big stimulus package from the coming administration of president-elect Barack Obama, creating a "sell the news" situation, he said.

In trading, the weak secondary was overshadowed by primary action from Turkey and the Philippines.

Where there was trading, poor U.S. jobs numbers and falling oil broadly pushed issues lower.

Plunging equities bounced volatility up by 4.83 to 43.39, according to the VIX index. The index is a commonly used yardstick of market volatility.

As a sector, emerging markets widened slightly by 6 basis points to 636 bps, according to the JPMorgan EMBI+ index. The EMBI+ determines the amount of extra yield investors will demand to hold assets in emerging market debt.

Turkey opens EMEA primary

Turkey helped the emerging European sector bring up the rear in 2009 issuance as it priced $1 billion in eight-year fixed-rate notes at par to yield 7½% (Ba3//BB-).

The deal priced at the tight end of talk that was from 7½% to 7 5/8%.

Citigroup and HSBC acted as bookrunners for the registered deal.

Proceeds will be used for general financing purposes and possibly the repayment of existing debt.

Meanwhile in Turkey, 30 people were arrested in connection with what the government considers a conspiracy to encourage the army to overthrow the ruling AK Party.

Nationalist former military brass, academics and journalists were among the detained.

Critics of the government consider the charges politically biased and supportive of a rising religious fundamentalism once forcefully banned in Turkey.

Emerging Europe boils over gas

Emerging Europe saw the rumors about a deal from Turkey take hold, but Orthodox Christmas was not all for celebration in Ukraine as Russia shut the fourth and last pipeline flowing into the country.

The last pipeline was the main artery that Russia used to deliver gas to Western Europe, OAO Gazprom deputy chairman Alexander Medvedev said in a statement.

Each side accused the other of shutting off the pipeline to the West.

Light sweet crude prices fell below $43 per barrel as the United States revealed larger reserves than expected.

Meanwhile, Balkan and Central European countries saw the last of their vital Russian supply cut off.

Bulgaria claimed its reserves would only suffice for a few more days, the BBC reported.

Negotiations between Moscow and Kiev are scheduled to resume on Thursday over debts and the price of future deliveries to Ukraine, while Europe hopes to avoid another major fuel crisis.

Philippines prices $1 billion

In Asia, the Philippines opened new deal season by pricing $1.5 billion 10-year bonds at 99.158 with a coupon of 8 3/8% to yield 8½% (B1/BB-/BB).

The deal matched the talk of 8½%.

Credit Suisse, Deutsche Bank and HSBC acted as bookrunners for the registered deal.

Proceeds will be used for general budgetary purposes.

Until midday Wednesday the size was anticipated between $500 million to $1 billion. And according to the Manila Times, "it will depend on the market," said national treasurer Roberto Tan before the sale.

"It is a benchmark-sized offer due in 2019. That's the tenor that [is] most in-demand given the current economic environment globally," Tan said in the report.

The new Philippine bonds due 2019 "were decently active," a trader said.

The bonds closed at 99.75 bid, 100 offered but were off their high near 100.5 bid.

The Philippine bonds due 2030 added 1.5 points to 110.5 bid.

Trading distracted by primary

Elsewhere, "Indonesia was very quiet," the trader said, after it "sold off a little overnight."

For the most part, "everybody's kind of focused on new issues right now," he said.

Also in Indonesia, exports within the energy sector may grow between 4.3% and 8% in 2009 due to an expanding range of buyers, said trade minister Mari Elka Pangestu, according to the Jakarta Post.

The energy sector boasted 18.3% growth between 2003 and 2007, but other sectors of the economy may only grow half as well as energy, the report said.

The Indonesian sovereign bonds due 2018 slipped 3 points to 83 bid.

Pakistan's government bonds due 2017 were quoted higher at 40 bid.

The road to Peru

In Latin America, Peru will open a two-day non-deal roadshow on the U.S. West Coast on Thursday, but the timing of a deal to follow "is still kind of TBD," an informed source said.

In general, "The sovereigns typically like to get their stuff done in the beginning of the year," he said, acknowledging that a window for deals is clearly open.

"It wouldn't shock people to see a Peru deal," he said.

In keeping with recent sovereign issues, Peru would likely offer a benchmark-sized bond.

Also in the category, Brazil added $25 million to the $1 billion 10-year bonds it priced Tuesday.

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