Emerging markets firm; Philippines prices; Urbi sets roadshow; Vietnam, Indonesia on tap

By Christine Van Dusen

Atlanta, Jan. 6 - Emerging markets firmed and spreads tightened Wednesday as more sovereign supply hit the market, a corporate issuer planned a roadshow and investors cautiously eyed Argentina's move to remove Central Bank governor Martin Redrado, market sources said.

The Republic of the Philippines brought to market its two-part $1.5 billion reopening of global notes. In all, the issuer priced $650 million 6½% bonds due 2020 at 106.25 to yield 5.674%, or Treasuries plus 183.7 basis points, and $850 million 6 3/8% bonds due 2034 at 96.5 to yield 6.664%, or Treasuries plus 195.7 bps, according to an informed market source.

The deal saw "pretty good" demand, which "should provide some comfort," a New York-based trader said. "Even though spreads and yields are relatively tight, there's still very good demand for new issuance."

Up next on the new-issuance stage could be Mexico's Urbi Desarrollos Urbanos SAB de CV, which is planning to sell $250 million of bonds this month and will hold a roadshow for the deal in the Jan. 11 week, according to a market source.

Other new issues on the radar screen: Indonesia's planned $4 billion offering of 10- and 30-year bonds via Barclays Capital, Citigroup and Credit Suisse and a planned issue of up to $1 billion in bonds from Vietnam via Barclays Capital, Citigroup and Deutsche Bank.

Those two should come "in the next few weeks," the trader said. "That's probably holding back performance a bit in the sovereigns, which were already trading very, very tight. It's a combination of supply plus Treasuries stalling things out a little bit."

Argentina draws attention

The biggest story on Wednesday on the sovereign front came from Argentina, where president Cristina Fernandez asked for the resignation of the Central Bank head after a disagreement over the use of bank reserves to pay debt, according to local news agencies. The resignation request was turned down, and the matter was not resolved as the New York market close neared.

"It's now a contentious situation," a New York-based market source said. "If he was fired and some other measure was implemented, then we could move on. But it's not good because we don't know how this will play out."

As a result of the uncertainty, Argentina's credit default swaps were "weaker," the source said. "It's interesting because everything else is ripping right, so for that one CDS to be weaker, there's a disconnect. We're seeing cash bonds lower. We're not looking at a sort of panicked selling, but it doesn't have a strong tone at all."

This comes as a bit of an about-face for the sovereign, which as recently as Tuesday was described as being an outstanding story in the region. "The bonds had rallied a considerable amount and really outperformed," the source said.

Another issue that had some investors concerned on Wednesday: the $1 billion 5½% 10-year fixed-rate notes from Banco Nacional de Desenvolvimento Economico e Social (BNDES) that priced Tuesday at 98.949 to yield 5.634%, or Treasuries plus 187.5 bps.

Though the deal was "excellent" in terms of "razor-sharp execution," some investors "felt squeezed a little too much, and we saw some selling with the deal sort of underperforming today," the New York-based market source said.

"On a dollar price basis, it was trading 50 cents lower," the source said. "Some investors who are dollar-yield players as opposed to spread-over-Treasuries players aren't really happy with that deal."

Philippines prices reopening

The Philippines (Ba3/BB-/) priced a two-part $1.5 billion reopening of global notes

The issuer priced $650 million 6½% bonds due Jan. 20, 2020 at 106.25 to yield 5.674%, or Treasuries plus 183.7 bps, and $850 million 6 3/8% bonds due Oct. 23, 2034 at 96.5 to yield 6.664%, or Treasuries plus 195.7 bps, according to a market source.

Barclays Capital, Deutsche Bank and HSBC were the bookrunners for the Securities and Exchange Commission-registered deal.

The 2020 bonds will be consolidated with the $750 million 6½% bonds issued on July 20, 2009. The 2034 bonds will be consolidated with the $1 billion 6 3/8% bonds issued on Oct. 23, 2009.

Proceeds will be used for general purposes of the Republic, including budgetary support, according to a filing with the SEC.

Vietnam plans bonds

Vietnam is planning to sell as much as $1 billion in bonds sometime "in the next few weeks," according to an informed market source.

Bookrunners for the deal, which could come with a 10-year maturity, are Barclays Capital, Citigroup and Deutsche Bank.

Other details on the structure and timing of the transaction were not immediately available.

Urbi plans bonds

Mexico's Urbi Desarrollos Urbanos is planning to sell $250 million in bonds this month and will hold a roadshow for the issue on Monday in Los Angeles and London and on Tuesday in Boston and New York, according to a market source.

Deutsche Bank and Banco Santander are the bookrunners for the offering.

Urbi is a homebuilding company based in Mexicali, Mexico.

Paul A. Harris contributed to this report

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