Emerging markets see buying; Panama auction pulled; Brazil 'sloppy'; inflows hit $522 million

By Christine Van Dusen

Atlanta, Dec. 17 - "Timing" was the word of the day in emerging markets on Thursday as issuers who had squeezed in deals before the end of the year suffered some and investors did some decent buying advance of the holidays and year-end, market sources said.

Among the new offerings that were weak was The Federative Republic of Brazil's $525 million of 5.875% global bonds due 2019, which were upped by $25 million to that final size on Wednesday when the issuer exercised the 5% greenshoe. The sovereign - which on Tuesday had priced a $500 million add-on to the existing debt at 108.2041 to yield 4.75% or Treasuries plus 113.9 basis points - was "trading pretty sloppy" on Thursday, a New York-based source said.

"It wasn't placed as well as they thought it would be, especially for being five times oversubscribed on the $500 million piece," the source said. "Since then the spreads on the 10-year sector are 20 to 25 basis points wider. And although emerging markets in general are a little bit wider, Brazil saw the brunt of the widening over the last two or three sessions."

Timing may have been the big problem, the source said. "Maybe it was just because it was done at the time of year where real money guys are not going to do it. The 2019s were 110 over Treasuries after starting the month at 135. There aren't going to be a lot of adders at that level."

Latin American issues, in general, are seeing "a lack of buyers right now," the source said. "It's a buyers' strike more than just a huge amount of supply. I think that guys are, with the massive tightening we saw during the first eight sessions of December, just sitting back right now."

Meanwhile an auction of bonds issued by the Republic of Panama was pulled because the seller was unhappy with the prices on offer in the market.

Citigroup had planned to sell a total of $759.72 million Panama global bonds for Banco Nacional de Panama, according to Thursday filing with the Securities and Exchange Commission.

The deal initially included $345.85 million of Panama's 6.7% global bonds due Jan. 26, 2036; $62.2 million of 8.125% bonds due April 28, 2034; and $351.667 million of 8 7/8% bonds due Sept. 30, 2027. But after an auction on the 2036 bonds, which attracted nearly $600 million in bids, the seller determined that the results were "not compatible with the requirements of the fiduciary fund" and all three sale were canceled, according to another SEC filing.

But other sovereigns fared well on Thursday, another market source said. Asia, in general, was "well bid," he said. "There just seems to be a lot of money out in Asia being put to work."

Indonesia too has been "extremely well bid as a sovereign" with good "liquidity in that region," the source said.

All of this is somewhat temporary, though. With Christmas a week away, "we're heading into a very, very quiet period," the source said.

Weekly inflows grow

Inflows into emerging market bond funds grew this week to $522 million, up 64.56% from $317.2 million seen in the previous week, according to data service EPFR Global.

"There's been a bias toward funds investing in the local currency denominated market, which is usually indicative of a higher risk appetite," said Cameron Brandt, global senior analyst for EPFR. "Given what's going on with Dubai World, that's good."

Year-to-date, inflows into emerging market bond funds hit $7.72 billion. "It's not likely to break the year-to-date inflow full-year record set in 2005, but it looks to be on track to come fairly close," Brandt said.

Panama sale canceled

The Banco Nacional de Panama canceled plans to sell a total of $759.72 million Republic of Panama global bonds via Citigroup, according to a filing with the Securities and Exchange Commission.

The sale initially included $345.85 million of Panama's 6.7% global bonds due Jan. 26, 2036; $62.2 million of 8.125% bonds due April 28, 2034; and $351.667 million of 8 7/8% bonds due Sept. 30, 2027.

But after an auction on the 2036 bonds that attracted nearly $600 million in bids, the seller decided the results were "not compatible with the requirements of the fiduciary fund" and canceled all three sales, according to another SEC filing.

The minimum price was to be $103.25 per $100 principal amount of the 2036 bonds, and the maximum was to be $107.25 per $100 principal amount of bonds.

The Banco Nacional de Panama was planning to sell the bonds in its role as trustee of the Fondo Fiduciario para el Desarrollo. The fund's assets are at present primarily in "marketable securities meeting established investment guidelines."

As of Oct. 31, the fund owned $902.217 million of Panama's debt securities that it acquired between 2000 and 2008 in the secondary market.

Proceeds were to be used for general governmental purposes, including the refinancing of domestic and external indebtedness and other budgetary purposes.

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