Emerging markets bounce back; primary open for JBS USA; investors watching earnings, equities

By Aaron Hochman-Zimmerman

New York, April 21 - Emerging markets improved Tuesday after tripping out of the gate on Monday.

U.S. treasury secretary Tim Geithner did not disappoint investors as his statements on Capitol Hill seemed to correct a skid that carried from Monday's session into Tuesday morning.

Equities jumped in New York's afternoon, and credit followed right behind.

JBS USA, LLC, the American affiliate of Brazil's beef and chicken producer, looked ready to price $400 million Wednesday morning in New York.

In trading, another recent offering from Brazil, $750 million from Telemar Norte Leste SA, has traded up nearly 2 to 3 points from reoffer, a syndicate official said.

Elsewhere, from the major markets, volatility sank 2.04 to close the day at 37.14, according to the VIX index. The index is a common measure of market volatility.

As a sector, emerging markets tightened by 4 basis points to a spread of 559 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.

LatAm watches primary

Latin America bounced back from Monday's losses thanks to a positive reaction to Geithner's testimony on Capitol Hill, a syndicate official said.

Meanwhile in Brazil, the new 9½% bonds from the telecom Telemar have been "performing well," he said.

The bonds have consistently traded 2 to 3 points above that reoffer price at 99.209, he said.

Also, the American affiliate of Brazil's JBS Friboi should get its $400 million five-year non-callable bonds done in the 13% area where it has been talked, the syndicate official said.

The JBS bonds due 2011 and 2016 have tightened nearly 150 bps since the offering was announced, he said.

At one point "I thought it might get done at 15%," he said.

Emerging Europe bounces back

Emerging Europe "recovered some poise" after Monday when it was "bad in our world," a trader said.

"Equities were in the green today," he said. And after the equity recovery, credit levels "fell; it bounced off the low, then settled down."

Still, the market was in a position to let the volatility pass without much damage to overall sentiment, he said.

The mood around the trading desks was "sit back and digest" the equity reaction to first-quarter earnings, he said.

The passive attitude may serve to quiet the primary market, which recently pushed through a $2.25 billion deal from OAO Gazprom.

The 9¼% bonds priced Friday at par but were seen lower at 98 3/8 bid, 98½ offered on Tuesday.

When the primary market reopens, eyes will be on some of the usual suspects, Russia's Sberbank and VTB, he said.

"Turkey is also a perpetual issuer, isn't it?" he asked as rumors circulated that Ankara may be interested to bring a new issue after it reaches a new arrangement with the International Monetary Fund.

Talks with the IMF are expected to resume in May.

The Turkish sovereign bonds due 2030 were seen at 142 bid, 143 offered.

Also in Russia, the ambassador to NATO, Dmitry Rogozin, said his country would cancel a planned meeting with NATO leaders if the Western alliance participates in military maneuvers in Georgia, reports said.

Russia has often expressed its unease with NATO's expansion east and is especially concerned about the possible inclusion of Georgia.

The Russian government bonds due 2030 were spotted at 97 1/8 bid, 98 3/8 offered.

Also in emerging Europe, Ukraine's bonds due 2016 were quoted at 57 bid, 59 offered.

Asia 'a little better'

Asia traded "a little better" as a reaction to Geithner's testimony to Congress, a trader said.

"It seems to have recovered reasonably well," he said, after Monday's drop. "People are looking to buy bonds again."

However, "the recent deals have definitely underperformed," he said, as investors possibly expected too much in the short term.

"They kind of stalled out a bit," he said on Tuesday, "as the market ran into a bit of headwinds yesterday and today."

After the immediate returns never materialized, "they were pretty quick to cut," he said.

The new sukuk from Indonesia has lingered near 100½ bid, 101 offered after pricing at par on April 14.

If any new supply is on the way, it will likely come from South Korea, he said, but "I haven't really heard of anything."

Meanwhile, in India the central bank cut interest rates by 25 bps to 4¾% in order to help spur economic growth.

The government also announced a cut in projected economic growth to 6% from 6½% in 2009.

The rupee was seen trading at 50.405 to the dollar.

Also in Asia, the Philippines' government bonds due 2030 were seen at 119½ bid, 120½ offered, while Pakistan's sovereigns due 2017 were seen at 51 bid, 56 offered.

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