Emerging markets bounce; Cemex to bring benchmark dollar bond offering; Indo local sukuk a success

By Aaron Hochman-Zimmerman

New York, Feb. 24 - Emerging markets remained hitched to equities, which rebounded as Federal Reserve chairman Ben Bernanke predicted the recession would end in 2009.

As Wall Street cleaned itself up after Monday's pummeling, Latin America and Asia made gains while emerging Europe was able to arrest its chronic losses.

Bonds from stable sources such as Brazil and Mexico had recently retested lows, but averaged gains over 1 point on Tuesday.

Also from Mexico, BB rated Cemex, SAB de CV entered the primary with a dollar benchmark expected to price in March.

Overall, sentiment was possibly the biggest gainer of the day as volatility sank 7.13 to 45.49, according to the VIX index. The index is a commonly used gauge of market volatility.

As Treasuries sold off slightly, emerging markets tightened by 8 basis points to a spread of 663 bps, according to JPMorgan's EMBI+ index. The EMBI+ determines the amount of extra yield investors will demand to hold assets in emerging market debt.

Cemex brings dollar benchmark

Cemex will begin a roadshow on Wednesday in London for a benchmark-sized, dollar-denominated offering of senior notes (//BB) with intermediate maturities and high-yield covenants.

The roadshow moves to New York on Monday and is expected to wrap up on March 4, with pricing thereafter, pending market conditions.

Citigroup is leading the deal, but the syndicate also includes BBVA Securities, HSBC, RBS Greenwich Capital and Santander Investments.

The notes will come with a make-whole call option to be set at a premium to U.S. Treasuries and will come with a three-year equity clawback.

Proceeds will be used to refinance debt.

The prospective issuer is a cement company based in Garza Garcia, Mexico.

Meanwhile on the sovereign side in Mexico, the 5 5/8% bonds due 2014 added 1.75 points to 102 bid, 102 3/8 offered.

Against backdrop of the cancelled 21-year offer from Mexico, "we'll see what they can pull off," said Enrique Alvarez, a Latin America debt strategist at think tank IDEAglobal.

LatAm trades softly

Latin America shared in equities' success on Tuesday, at least as far as sentiment was concerned, Alvarez said.

In actual price terms, "everything is sort of flat," he said, with major credits in Brazil and Mexico "holding at key support levels."

Credit was able to follow equities for the day, but economic "numbers coming from the region are terrible," Alvarez said.

Still, desks were quiet as some investors were "waiting around to see what president Obama says" and others were preoccupied with Carnival in the lead up to Lent.

The Brazilian 5 7/8% bonds due 2019 were better by 1.25 point to 95.75 bid, 96 offered.

In Argentina, farmers demanded that bankers renegotiate loans made to the suffering agricultural sector.

"It seems like private banks haven't heard that we're in a state of emergency," said Alfredo De Angeli, head of Entre Rios province Argentine Small Farmers' Federation.

Interior minister Florencio Randazzo called the farmers demands "anti-democratic," adding that their insistence demonstrates the "intolerance" of the protesting farmers, the Buenos Aires Herald reported.

"People are leaving her side of the aisle," Alvarez said about president Cristina Kirchner.

The 8.28% Argentine discount bonds due 2033 tacked on 1.125 points to 28.5 bid, 29.5 offered.

Elsewhere in Latin America Venezuela's 9¼% bonds due 2027 improved by 1.25 point to 54.65 bid, 55.45 offered.

Indo retail grabs local sukuk

In Indonesia, the government announced that it has $500 million in orders of its local sukuk from the retail sector, according to the Jakarta Post.

The figure nearly triples the initial target.

"It's an example of how dynamic the financial market conditions are," finance minister Sri Mulyani Indrawati told reporters.

The bonds were offered through 13 banks, including Bank Mandiri, Bank Syariah Mandiri, Citibank NA, HSBC and Bank BII, Danareksa Sekuritas, CIMB-GK Securities Indonesia, Reliance Sekuritas, Trimegah Securities, Andalan Artha Advisindo Sekuritas, Anugerah Securindo Indah, BNI Securities and Bahana Securities.

The proceeds will be used to patch a 136.9 trillion rupiah gap in the national budget.

The Indonesian bonds due 2018 closed at 77 bid, 79 offered.

Asia 'obviously better'

The market tone for Asian credit "was obviously better," a trader said.

There was some selling in CDS and "cash priced firmed up," he said.

Out of the Philippines, "the news economically continues to be pretty benign," he said, plus "they're funding is essentially done and dusted for the year."

Even when the bonds dip, investors are ready to "buy into the weakness," which makes them "very well supported," he said.

The Philippine bonds due 2030 finished at 114.5 bid, 115.5 offered.

Also in Asia, Pakistan's bonds due 2017 were quoted at 42 bid, 46 offered.

Emerging Europe still

Emerging Europe remained eerily quiet for the second day this week, a London-based trader said.

"There is nothing going on," he said as equities and the action from Washington, D.C., provided ample distraction.

"Generally, it's a little bit heavy," he said, but "it's kind of drifting."

"Russia slipped a little," he said.

Meanwhile, the government is confident that it can cut spending in 2010 and 2011 if the global economic troubles persist, said top economic adviser Arkady Dvorkovich.

"At present, we've made calculations for three years. If we see that the crisis lingers on, we will make reductions of not urgent and effective expenditures in 2010-2011. But now it is untimely to speak about this," he said.

The Russian sovereign bonds due 2030 fell 0.5 point to 88.5 bid, 88.75 offered.

In Ukraine, prime minister Yulia Timoshenko pressed politicians to remain optimistic in the face of the economic crisis.

"Those people, especially politicians, who say that Ukraine is on the worst position in the world economic crisis system, this absolutely does not correspond to reality," she said, according to the Unian news service.

She noted that industrial production fell in Ukraine by 16.1%, compared to 19.9% in Russia and 10.4% in Kazakhstan, the report said.

Also in Turkey, the bonds, which had been put through the wickets for the past two weeks, seem to have found a bottom.

"The selling pressure, the abstract nature of the drops has stopped, for sure," the trader said.

The Turkish government bonds due 2030 were quoted at 125 bid, 127 offered.

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