Indonesia's PLN prices notes on topsy-turvy day for EM sentiment; Spreads end day wider

By Christine Van Dusen

Atlanta, Nov. 15 - Indonesia's PT Perusahaan Listrik Negara (PLN) sold notes on a Tuesday that saw market sentiment swing from risk aversion to demand and back to aversion as emerging markets investors continued to cope with uncertainty out of Europe.

"It's a busy morning as the latest bout of euro risk aversion brings selling to emerging Europe, the Middle East and Africa, with assets 5 to 30 basis points wider depending upon the name," a London-based trader said.

By midday in Europe, the tone changed.

"It's a real game of two halves as we spend the morning drifting wider on the back of yet more euro-induced paranoia before some half-decent data out of the United States brings in the first real demand of the day and spreads tighten 10 bps from the wides," he said.

The Markit iTraxx SovX index spread was 5 bps wider on the day.

"That's pretty impressive when French [government bonds] have widened over 20 bps today versus Bunds, as France becomes the E.U. sovereign to focus on," he said.

But by the day's end, spreads widened further, he said.

"Activity picked up today," he said. "However, once again, the backdrop remained poor. My market seems to be trundling along while the European bond market looks like carnage."

PLN sells bonds

In its new deal, Indonesia-based electric company PLN priced a $1 billion issue of 5½% notes due 2021 at 99.054 to yield 5 5/8%, a market source said.

The notes priced at the low end of talk, set at 5 5/8% to 5¾%, via Barclays Capital and Citigroup in a Rule 144A and Regulation S deal.

Proceeds will be used for capital expenditures and general corporate purposes.

South Africa taps bookrunners

Also on Tuesday, South Africa mandated Barclays Capital, Nedbank Capital and Rand Merchant Bank for a roadshow from Nov. 23 to Dec. 1, a market source said.

The marketing trip will begin in London and travel to Geneva, Zurich, Munich, Frankfurt, Amsterdam, Los Angeles, San Francisco and Boston before wrapping up in New York.

"South Africa is putting in a decent bounce as early selling ahead of their roadshow announcement was overdone, as right now it's promised to be just a non-deal roadshow," a trader said. "But spreads are still 20 bps wider."

Indonesia deal oversubscribed

In other deal-related news, the final book for Indonesia's $1 billion issue of 4% notes due 2018 - which priced at par late on Monday - was $6.5 billion with 250 accounts involved, a market source said.

Citigroup, HSBC and Standard Chartered were the bookrunners for the Rule 144A and Regulation S issue.

About 32% of the orders came from Asia, 30% from the Middle East, 18% from Europe, 12% from Indonesia and 8% from the United States.

Funds accounted for 59%, banks 17%, central banks 11%, private banks 7% and insurers 6%.

Russia quasis drift wider

In trading on Tuesday, Russia's quasi-sovereign bonds continued to drift wider.

"In Russia it's the banks that are under the most pressure as stories about poor local liquidity gain traction, leading to names like Sberbank and Alfa Bank widening 30 bps," the London trader said. "Vimpelcom's 2022s are still the benchmark, down 2 points today at 86.50."

Said another trader, "As usual, poor Vimpelcom takes the brunt of the pain. If it were not for local support, this lot would be lower still."

Turkey opens wider

From Turkey, bonds opened wider in line with the broader market, despite unemployment data that came in line with estimates.

"Banks in Turkey remain well bid," the London trader said.

And Ukraine was seeing reduced liquidity and weaker prices during the European morning on Tuesday.

"But corporates continue to trade OK," he said.

Looking to Kazakhstan, BTA Bank bounced about a point from early lows while demand was seen for Halyk Bank and Kazkommertsbank.

IPIC bonds active

Turning to the Middle East, investors remained focused on Abu Dhabi-based International Petroleum Investment Co.

"Better sellers have emerged this morning as the backdrop remains poor at best," a trader said. "The 2016s and 2017s are slightly outperforming, with the 2016s trading a few times near 103.25 yesterday. The 2015s have cheapened up a lot of late but I suppose $3.75 billion worth of supply will do that to a previously hard-to-find bond."

The 2022 notes were well bid by midday, trading at 99.33 bid, 99.73 offered.

Middle East in focus

Qatar's long end was "super-heavy," a trader said.

And Dubai and Dubai Water and Electricity Authority bonds were under some pressure, closing 5 bps to 15 bps wider.

"Emirates' 2015s are again showing the power of retail investors," he said. "We saw good interest around the 99.25 and 99.375 level despite the overall tone."

And sellers were seen for Kuwait-based Kipco's 2020s.

On the new issue front, "it's shaping up as a busy month for sukuks," he said, noting that market watchers were whispering about possible notes from Emirates.

Meanwhile, from Africa, Morocco saw its 2017s trading with a 104 handle and its 2020s trading just above 90, a trader said.

"Namibia and African Export-Import Bank are marked lower," he said. "Egypt felt heavy, for the most part."

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