Emerging markets stumble again; Colombia retaps 7 3/8% bonds for $1 billion; spreads wider

By Aaron Hochman-Zimmerman

New York, April 14 - Emerging markets fell along with equities, but sentiment for the coming weeks remained generally strong.

Levels slipped on Tuesday, but market watchers had their eyes on financial sector earnings, which are expected during the next week.

In trading, the negative trend was somewhat contradicted in emerging Europe as Turkey found its bonds due 2030 at 144.75 bid.

An investor can "make money being long for the next 10 or 20 points," a trader said, as it seems the market "wants" to go higher.

For the last few months the same story has been told, he said.

"Nothing much changes in that regard," he said, except the effects on the primary.

The better the secondary does, the more frequent new deals come through the pipeline, he said.

On Tuesday, it was Colombia with a $1 billion retap of its 7 3/8% bonds due 2019 to yield 7 3/8%.

Equities were hurt on Tuesday, but volatility still slipped 0.14 to close at 37.67, according to the VIX index. The index is a common measure of market volatility.

While investors ran back to Treasuries, emerging markets were seen wider by 7 basis points at a spread of 576 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.

Emerging Europe quiet, steady

Emerging Europe remained quiet as the markets shook off the holiday break.

A trader who returned from a week-long holiday said "most of the bonds I trade are up a few points from where I left them" and "the world thinks all the ills are being solved."

Still, "I'm a little suspect," he said.

The direction for the rest of the week was difficult to determine, he said.

"It's really too quiet for me to sense," he said. "There are no sellers," but the market had some "buyers or potential buyers on dips."

In Ukraine, the parliament did not hear debate over the issues affecting compliance with the International Monetary Fund's terms for further assistance.

The bloc of prime minister Yulia Timoshenko offered the most support to the measure, while the Our Ukraine supporters of president Viktor Yushchenko only mustered half of their votes, the Unian News Agency reported.

Meanwhile, Yushchenko held meetings with party leaders to discuss the balancing of pension funds and the budget of national energy firm NJSC Naftogaz Ukrainy.

The leaders also discussed the country's banking system and confidence in the economy.

More banks have added their names to the 11 which have already requested federal assistance, according to the president's official web site.

The financial sector has led to a crisis of confidence, but the global economic picture is only partially to blame, the president said.

The "influence of the global crisis was not the key factor of what has been happening at currency market in last few months. Minimal people's confidence in both banking system and national currency was last due to political events," Yushchenko said.

The hrvynia was seen trading at 8.012 to the dollar.

Poland seeks IMF backstop

The IMF also heard from Poland, which asked the IMF for $20 billion to backstop its economy.

The zloty was seen trading at 3.223 to the dollar.

Meanwhile in Turkey, no deal with the IMF was announced, but the government posted word of a $5.5 billion budget deficit in March, reports said.

The figure pushed the total first-quarter deficit to $12.1 billion, the Finance Ministry announced.

By the end of 2009, finance minister Kemal Unakitan predicted a $30 billion deficit, which is drastically higher than the previous prediction of $6.6 billion.

The Turkish government bonds due 2030 were seen at 144.75 bid, 145.5 offered.

Also in emerging Europe, Russia's bonds due 2030 were quoted at 98.5 bid, 98.75 offered.

Colombia reopens 7 3/8% notes

Colombia priced a $1 billion reopening of its 7 3/8% notes due 2019 at par to yield 7 3/8% (Ba1/BBB-/BB+).

The retap came tight to the talk from 7½% to 7 5/8%.

Citigroup and JPMorgan acted as bookrunners for the deal.

The original $1 billion issue was priced on Jan. 6, 2009 to yield 7½%.

LatAm wider, primary dominates

Meanwhile, Latin America widened out on low volumes, but the focus was still largely on the primary.

Brazil's Telemar Norte Leste SA announced talk of 9¾% to 10% for its $750 million 10-year senior unsecured notes (Baa3//BBB-).

Citigroup has the left books for the deal, while Banco Itau, Banco Santander, BB Securities and Bradesco BBI will act as co-managers.

A roadshow will be held from April 13 to April 16 in Boston, New York, London, the U.S West Coast and the Philadelphia area.

Proceeds will be used to refinance outstanding debt and for general corporate purposes.

Telemar is a Rio de Janeiro-based telecommunications firm.

Asia pushed lower

Asia widened on slow volumes as equities fell and markets adjusted to the weeks of rallying that led into the past long weekend.

In the Philippines, foreign direct investments took on inflows of $13 million during January, compared to $27 million in January 2008, the central bank said.

"Sound macroeconomic fundamentals have continued to attract FDI inflows into the country although at a lower level given the difficult global economic conditions," bank governor Amando Tetangco said in a statement.

In Indonesia, tax collectors managed to bring $14.57 billion to federal coffers after the first quarter, according to the Jakarta Post.

The figure represents about 20% of the target collection for 2009.

The total economic growth is expected to slow to nearly 4.5% in the first quarter, down from 6.1% in 2008.

The rupiah was seen trading at 10915 to the dollar.

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