Emerging markets push higher; Petronas prices behemoth $4.5 billion; Argentina strengthens

By Aaron Hochman-Zimmerman

New York, Aug. 5 - Emerging markets' march higher was again unimpeded by domestic news or the unimpressive showing in the major markets.

Malaysia's Petroliam Nasional Bhd. turned heads as it priced $4.5 billion over two tranches, both at Treasuries plus 162.5 basis points.

Mexico's Alestra SA also joined the primary parade with its own $200 million deal.

On the trading side, investors refused to make any changes in their buying habits as Argentina tightened passed distressed levels and as secondary trading levels were up across the board, with few exceptions.

From the major markets, volatility was nearly unchanged as the VIX index ended just 0.01 higher at 24.90. The index is an often used yardstick of market volatility.

As a sector, emerging markets tightened by another 5 bps to a spread of 340 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.

The EMBI global diversified index, which represents sovereigns and quasi-sovereigns, was tighter by 12 bps with a spread of 340 bps.

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

Petronas, Alestra price

Petroliam Nasional priced $4.5 billion over a five-year sukuk and 10-year conventional bond (A1/A-/).

The five-year sukuk totaled $1.5 billion, while the 10-year conventional bond amounted to $3 billion.

Both tranches priced at spreads of Treasuries plus 162.5 bps. The pricing came tighter than the original talk of Treasuries plus 175 bps.

CIMB Bank, Citigroup and Morgan Stanley acted as bookrunners for the deal.

Petronas is a Kuala Lumpur-based government-run oil firm.

The order book was believed to have topped $40 billion, a market source said.

Alestra announced the pricing of a $200 million five-year senior unsecured note (B1/B+/BB-) at par to yield 11¾%.

The bonds were originally talked at 12%, but talk was revised to 11¾%.

Citigroup and Morgan Stanley acted as bookrunners for the deal.

Alestra is a San Pedro Garza Garcia, Mexico-based telecommunications firm.

Emerging Europe unfazed

Despite the specter of renewed conflict, Emerging Europe traded higher still.

In Russia, foreign minister Sergei Lavrov praised the European Union and its work to mediate a simmering reprise of conflict with Georgia.

"The presence of E.U. monitors on Georgian territories bordering South Ossetia and Abkhazia is an important stabilizing factor and we support such a presence," Lavrov said, according to reports.

Unconfirmed reports of shots fired on both sides of the South Ossetian border has ratcheted up tensions between the former Soviet states.

Lavrov also accused Tbilisi of trying to hide behind the United States.

Many of the statements out of the Georgian capital have been aimed at "dragging Americans into Georgia and pitching them against the Russian military," he said.

The Russian bonds due 2030 added just 1/8 point to 101 7/8 bid.

Turkey also continued on its upward trajectory by adding 1¼ point to its sovereigns due 2030, which were quoted at 158.6 bid, 159.6 offered.

LatAm led up by high-beta

Latin America continued its march upward, led by the high-beta credits.

Argentina broke through distressed spreads on Wednesday while in cash levels the Boden 12 was better by 3 points to 27.9 bid, 28.1 offered.

The benchmark 8.28% Argentine discount bonds due 2033 slipped ¾ point to 61¼ bid, 62¼ offered.

Also in Argentina, president Cristina Kirchner met with Colombia president Alvaro Uribe, who is on a regional tour to explain his decision to allow a greater U.S. military presence in Colombia.

Kirchner has privately criticized the deal, which allowed the United States the use of four new military installations, sources said, according to the Buenos Aires Herald.

Uribe will also visit the heads of left-leaning governments in Brazil, Chile, Paraguay and Peru to ease concerns regarding the U.S. military.

In Brazil, the bonds priced on Tuesday by Cosan Combustiveis e Lubrificantes were trading well, a market source said.

The 9.5% bonds due 2014, which were priced at 99.51, were seen trading at 99 1/8.

Meanwhile, the 7 1/8% Brazilian sovereign due 2019 was seen unchanged at 103.55 bid, 104½ offered.

Also, the Petroleum Co. of Trinidad and Tobago began its roadshow for a dollar-denominated benchmark-sized 10-year senior unsecured bullet bond (Baa3/BBB).

The roadshow began in London and will proceed to New York, Boston and Los Angeles.

Credit Suisse and JPMorgan have the books for the deal.

Other high-beta credits held their strength.

Venezuela's 9¼% bonds due 2027 were quoted better by 1/8 point at 73¾ bid, 74½ offered.

Ecuador's 9 3/8% bonds due 2015 were seen at 77 bid, 79 offered.

Asia still winning

Asia posted another strong day even without any significant leadership from the developed economies.

The quickly tightening bonds priced at 99.578 by South Korea's Woori Bank on July 27 were seen at 102 bid.

Meanwhile in Indonesia, an East Borneo, Indonesia-based government-run fertilizer producer, PT Pupuk Kaltim, plans to issue up to 1.3 trillion rupiah in bonds into the local market before October, according to the Jakarta Post.

The company mandated Dana Reksa as the bookrunner.

Proceeds will be used for ongoing projects.

Also in Indonesia, the central bank cut its benchmark rate by 25 bps to 6½%.

"This decision was made after the board of governors concluded that the declining inflation rate continues in line with the limited domestic demand as well as the expectation of declining inflation," the bank said in a statement.

The Indonesian government bonds due 2019 gave up ¾ point to 136¾ bid, 137 offered.

The rupiah was seen trading at 9,910 to the dollar.

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