Emerging markets strong on primary action; Slovenia prices bonds, Peru talks; spreads wind tighter

By Aaron Hochman-Zimmerman

New York, March 25 - Emerging markets held a full head of steam even as equities dipped midday.

The primary market was jolted awake on Wednesday by the pricing of a €1.5 billion bond from Slovenia during New York's early afternoon.

Peru followed with its own $1 billion offering, talked at Treasuries plus 437.5 basis points, but the deal was not able to price by the market's close.

Trading was also stronger, a strategist said.

The market will "remain pretty good until the end of April," he said, predicting the market will follow a five- to six-week cycle of gains and losses.

"Here we are," he said, in the middle of the upside of the cycle.

From the major markets, volatility built throughout the day but tumbled into the close at it gave up 0.68 to finish at 42.25, according to the VIX index. The index is a frequently used yardstick of market volatility.

As a sector emerging markets pulled tighter by 14 bps to a spread of 615 bps, according to JPMorgan's EMBI+ index. The EMBI+ calculates the amount of extra yield investors will demand to hold assets in emerging market debt.

The EMBI global diversified index, which represents sovereigns and quasi-sovereigns, was tighter by 16 bps with a spread of 660 bps.

The diversified index has a less strict liquidity rule for inclusion.

Slovenia prices €1.5 billion

Slovenia began the primary action as it priced €1.5 billion 4 3/8% five-year bonds at a price of 99.837 and a spread of mid-swaps plus 160 basis points.

The bonds (Aa2/AA/AA) priced in line with talk of mid-swaps plus 160 bps.

Abanka Vipa, BNP Paribas, Deutsche Bank and Dresdner Kleinwort acted as bookrunners for the deal.

Emerging Europe follows rally pace

Elsewhere the tone in emerging Europe was unharmed by the outburst of Czech Republic prime minister Mirek Topolanek, who called the U.S. economic plan "the way to hell." The positive sentiment was buoyed by both equity support and government pledges to back the International Monetary Fund.

In Russia, the government will sell 529 billion rubles in debt and retire 100 billion rubles, finance minister Alexei Kudrin said at a Wednesday conference, according to the Itar-Tass News Agency.

"This will be happening every year from now on and the financing of the budget deficit with borrowings will be inevitable," he said in the report.

The ruble was seen trading at 33.638 to the dollar.

In Turkey, prime minister Recep Tayyip Erdogan announced a planned cut to the nation's value-added tax in order to spark financial and industrial spending.

The cuts will be targeted at furniture manufacturers, those buying or selling businesses and the purchase of some industrial machines, the Hurriyet Daily News reported.

The Turkish sovereigns due 2030 continued higher by 0.5 point to 136 bid, 136.25 offered.

Also in Romania, the IMF has pooled a €20 billion emergency loan from the European Union, the World Bank and its own coffers for a loan to Bucharest.

Peru pushes LatAm

Latin America was uplifted as Peru talked a $1 billion 10-year bond at Treasuries plus 437.5 bps (Ba1/BBB-/BBB-).

Goldman Sachs and JPMorgan will act as bookrunners for the registered bonds.

Proceeds will be used to replenish more than $500 million from the national treasury and to retire outstanding debt.

The 8 3/8% Peruvian bonds due 2016 were quoted at 110.625 bid, 111.25 offered.

Also, in Brazil the 11% bonds due 2040 were seen at 126.15 bid, 126.5 offered.

Asia trades mixed

Asian levels held even as the other sectors provided most of the news on Wednesday.

In the Philippines, bonds held their strength even as equities in Asia underperformed the U.S. and European markets.

The Philippine sovereigns due 2030 fell just 0.125 point to 117.375 bid, 118.75 offered.

In Indonesia, after Tuesday's $15 billion currency swap with China, the central bank hopes to enter into similar agreements with other countries, the Jakarta Post reported.

"We are open with other nations," central bank governor Boediono told reporters. He did not name specific countries.

The rupiah was seen trading at 11,525 to the dollar.

Hana Bank picks six

Meanwhile, South Korea's Hana Bank mandated Barclays, Citigroup, Credit Suisse, Goldman Sachs, HSBC and ING as bookrunners for a dollar-denominated benchmark-sized bond offering.

A roadshow for the deal will begin on March 30.

Hana Bank is a Seoul-based commercial and retail bank.

© 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.