Emerging markets stay on track; Qatar brings $3 billion, Hana prices $1 billion; Philippines, Indonesia bonds higher

By Aaron Hochman-Zimmerman

New York, April 2 - Emerging markets trooped higher in step with significant market rallies around the world on Thursday.

"It's gotten better ... the world's a better place, I guess," a trader said.

"My guess is there's more of it to come," he said about the persistent rally.

A strategist looked ahead to earnings reports from Citigroup Inc. on April 17 and Bank of America Corp. on April 20 as watershed events.

With the new easing of the mark-to-market rules, the market will probably get "a nice surprise," he said.

The primary pipeline also continued to maintain its relatively strong flows.

The biggest deal was $3 billion of sovereign debt from Qatar.

South Korea's Hana Bank moved $1 billion as similar issues tightened into the supply.

In trading, benchmark issues the Philippines bonds due 2030 and the Indonesia bonds due 2019 were both stronger by 2.5 points.

From the major market, volatility slipped by just 0.24 to 42.04, according to the VIX index. The index is a common measure of market volatility.

As a sector, emerging market spreads wrapped tighter by 25 basis points to a spread of 609 bps, according to JPMorgan's EMBI+ index. The EMBI+ estimate 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 25 bps with a spread of 656 bps.

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

Primary pours on more

Issuers continued to take advantage of the positive tone and open windows in the market on Thursday.

The state of Qatar led with largest deal, $3 billion of sovereigns (Aa2/AA-) in two tranches of senior fixed-rate notes, both coming to market better than talk.

The deal included $2 billion of 5.15% five-year notes that priced at a 340 basis points spread to Treasuries, at a reoffer price of 99.909 to yield 5.171%.

The spread came 10 bps tighter than the Treasuries plus 350 bps price talk.

The long tranche was a $1 billion issue 6.55% 10-year notes that priced at Treasuries plus 380 bps, at a reoffer price of 99.682 to yield 6.594%.

The spread was 7.5 bps tighter than the Treasuries plus 387.5 bps price talk.

Barclays Capital, BNP Paribas and Goldman Sachs & Co. managed the Rule 144A/Regulation S deal.

Hana Bank priced $1 billion three-year senior unsecured bonds in line with talk at mid-swaps plus 490 bps (A2/A-/A+).

The deal priced at 99.555 with a coupon of 6½% and a yield of 6.666%.

Barclays, Citigroup, Credit Suisse, Goldman Sachs, HSBC and ING acted as bookrunners for the deal.

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

In Latin America, Brazil's Odebrecht Finance Ltd. priced an upsized $200 million five-year bond at 98.522 with a coupon of 9 5/8% to yield 10% (/BB/BB+).

The bonds priced at a spread of Treasuries plus 825 bps on behalf of Constructora Norberto Odebrecht SA.

The amount was upsized from $150 million.

Banco Santander and Banco Itau acted as bookrunners for the deal.

Proceeds will be used for general corporate purposes and reinvestment.

Odebrecht SA is a Rio de Janeiro-based construction firm.

Meanwhile, Russia's OAO Gazprom priced CHF 400 million two-year bonds at par with a coupon of 9% (A3/BBB/BBB).

The deal was originally announced at a minimum CHF 200 million. Price talk was in the 9% area.

BNP Paribas acted as bookrunner for the deal.

Gazprom is a Moscow-based government run energy firm.

The bonds were largely "locked away" by local investors, a trader said. "That won't be a trading instrument."

Emerging Europe higher

At the trading desks, emerging Europe was "not that busy," although "it feels like it" as the optimistic tone lifted spirits.

In Turkey, the government is expected to meet with the International Monetary Fund again in order to finalize the deal to support the Turkish economy, reports said.

The central bank governor Durmus Yilmaz pushed the government to come to terms as soon as possible.

The Turkish sovereign bonds due 2030 jumped 2.25 points to 139 bid, 140 offered.

Meanwhile, the streets of London were a bit calmer as the G-20 conference leaders took on the issues concerning the future roll of organizations such as the IMF.

Russia president Dmitry Medvedev suggested that IMF be given another $1 trillion in order to support struggling economies, an aide said, according to the RIA Novosti News Agency.

"Reform of the IMF has been backed by practically all partners," said Arkady Dvorkovich in the report.

Committed bears will argue why the money handed over to the IMF will not make a difference, but for the moderates, "it's clearly short-term good," the trader said.

The Russian government bonds due 2030 improved by 1.125 points to 95 bid, 95.5 offered.

Ukraine's bonds due 2016 were unchanged at 43 bid, 46 offered.

Asia 'pretty firm'

Asia traded "pretty firm" on Thursday as "the whole market is trading very well," a trader said.

"Sovereigns traded up nicely," while the success of the Hana Bank deal served as a "good catalyst" for secondary buying, he said.

"People are realizing they're not able to get all they want in the primary market," he said.

"At some stage I'm sure you're going to see some indigestion," he said, but for now it "reassures the market that there is plenty of demand."

"The supply calendar had been weighing over Korea," he said, but the five-year CDS came in nearly 50 bps to 290 bps bid.

In Indonesia, "the new issues are actually outperforming" as levels were better by 1 to 2 points.

Also, the Asian Development Bank provided the government a $140 million loan in order to support infrastructure spending.

The majority of the money is slated for the Renewable Energy Development (RED) Project, according to the ADB web site.

The Indonesian bonds due 2019 tacked on 2.5 points to 111.5 bid, 112.5 offered.

Meanwhile in the Philippines, the government borrowed PHP 252.02 billion in January and February, compared to PHP 98.17 billion during the first two months of 2008, according to the Manila Times.

Of the total, PHP 80.57 billion was borrowed overseas.

Many of the overseas lenders included development banks such as the Asian Development Bank and the International Bank for Reconstruction and Development.

The Philippine government bonds due 2030 also added 2.5 points to 121.5 bid, 122.5 offered.

Also, Pakistan's bonds due 2017 were seen at 49 bid, 51 offered.

LatAm on higher ground

Latin American levels improved with the rest of the world's markets on Thursday.

"The G-20 seems to have done us well," a strategist said.

Maybe the world's leaders found the "magic number" to throw at the problem, he said.

Argentina actually found a way to drop lower on the day.

The 8.28% Argentine discount bonds due 2033 fell by 1 point to 26.25 bid, 28.25 offered.

Venezuela was better as oil saw better demand.

Light sweet traded close to $53 per barrel while the 9¼% government bonds due 2027 added 0.75 point to 59 bid, 59.5 offered.

In Brazil, where Odebrecht provided the region's primary activity, the 11% sovereigns due 2040 were better by 0.5 point to 127.85 bid, 127.95 offered.

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