Emerging markets credits stay strong; Panama prices bonds in recharged primary; Israel holds off

By Aaron Hochman-Zimmerman

New York, March 18 - Emerging markets turned the strong market tone and improved trading over into a rejuvenated primary market on Wednesday.

Panama priced a $323 million retap of its bonds due 2015, while Israel, citing the Treasury rally, decided to wait another day to price its dollar benchmark.

Interest in the Israeli deal was strong, a buysider said, as the bonds traded up 2 points in the gray market.

"It's probably a good sign we're seeing this new issuance get done," a buysider said, but we will "still have to assess" where the market is headed in the future.

In secondary trading, the tone remained strong as equities and Treasuries held sway.

As oil lingered just below $50 per barrel, Venezuela added 2.7 points to its benchmark bonds due 2027.

Also, as equities managed another winning day, volatility eased by 0.74 to 40.06, according to the VIX index. The index is a frequently used yardstick of market volatility.

As a sector, emerging markets widened by 25 basis points on Treasury action to a spread of 656 bps, according to JPMorgan's EMBI+ index. The EMBI+ estimates the amount of extra yield investors will demand to hold assets in emerging market debt.

Panama prices, Israel lingers

Panama reopened its 7¼% senior fixed-rate bonds due 2015 for $323 million at a price of 101, according to a market source.

The bonds (Ba1/BB+/BB+) matched the talk at 101.

Morgan Stanley and UBS acted as bookrunners for the deal.

Proceeds will be used for general budgetary purposes.

"It went well," a buysider said, but the interest in the issue was largely a known quantity beforehand.

Meanwhile, by the end of the session Israel postponed its benchmark deal in light of a major rally for U.S. Treasuries, a market source said.

Earlier in the day Israel announced talk of Treasuries plus 287.5 bps for its dollar-denominated benchmark-sized 10-year bonds (A1//A).

The deal is now scheduled to price Thursday.

Citigroup, Deutsche Bank and Goldman Sachs will act as bookrunners for the registered deal.

"The book was pretty oversubscribed," the buysider said, with a lot of local demand.

Emerging Europe steps higher

Also in emerging Europe, the government in Russia will most likely allow Ukraine to purchase 33 billion cubic meters rather than the previously agreed to 40 billion cubic meters in 2009, said Ukrainian fuel and energy minister Yuriy Prodan, according to the RIA Novosti News Agency.

Kiev has also asked Russia for a $5 billion loan in order to help make near-term gas payments.

The Russian government bonds due 2030 tacked on 1.375 points to 93.875 bid.

Meanwhile in Ukraine, president Viktor Yushchenko said he expects the gas transit system to change as the European Union offered money to improve the shared fuel lines.

"It is clear that after the situation with supplies of gas to European Union countries the ideology of European gas policy is revised. Therefore the model of Ukrainian segment of European gas market should be transformed as well," Yushchenko said according to his official web site.

"We support diversification and realization of principles that would preserve Ukraine's permanent participation in shaping European gas market," he said.

Elsewhere in Turkey, as the government has continued to buoy talk of a deal with the International Monetary Fund.

The Turkish sovereign bonds due 2030 were quoted at 130 bid, 130.75 offered.

LatAm strong as Panama prices

Latin America's session was highlight by Panama's new issue, but in Argentina, little progress came from a fourth meeting over export taxes, farmers said, according to the Buenos Aires Herald.

"Regrettably, the government's main priority is revenue. As from this moment the liaison board sets the debate in Congress as one of its main priorities," said farm leader Eduardo Buzzi in the report.

The 8.28% Argentine discount bonds due 2033 added 0.5 point to 27.5 bid.

Elsewhere, Venezuela turned in a strong showing as oil tried again in vain to break $50.

The 9¼% Venezuelan government bonds due 2027 jumped by 2.7 points to 59 bid.

Asia waits on corporates

Asia turned in another positive day as its contribution to the primary came from the corporate side.

South Korea's Posco ended a roadshow for its dollar-denominated bond offering.

No further word of a deal followed, but other deals from South Korea have been rumored, including the Industrial Bank of Korea, the Export-Import Bank of Korea and Korea Railroad.

Meanwhile in the Philippines, the government has only limited room to expand deficit spending, the Asian Development Bank warned, according to the Manila Times.

Manila currently runs a deficit of 2% of GDP, or PHP 177.2 billion.

"While this new projection seems manageable, given the country's current ratios, our perception is that the Philippines has relatively limited fiscal space to run larger deficits for a sustained period," said Arjun Thapan, ADB director general, in the report.

The peso was seen trading at 48.105 to the dollar.

In China, the World Bank cut GDP growth prospects to 6.5% from 7.5% in 2009, reports said.

Exports have fallen by 25% so far in 2009, compared to figures from the same period in 2008.

"China's exports have been hit badly," the World Bank said in a statement.

Still, China is "a relative bright spot" in the region, said country director David Dollar in the statement.

Also in Indonesia the bonds due 2019 added 1.375 points to 105 bid, 105.5 offered.

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