EM sees relief rally, but investors still anxious; Bahrain tightens; Gazprom sets roadshow

By Christine Van Dusen

Atlanta, Sept. 30 – Emerging markets bonds improved in trading on Wednesday as the equity market continued its relief rally, though investors remained anxious.

“After another weak trading session yesterday, markets seem to end the month on a more constructive tone,” a trader said.

Trading of Pakistan’s new bond was limited on Wednesday morning but was expected to pick up on the news that the International Monetary Fund has provided more funds to the sovereign and waived the performance criteria for the budget deficit and the net government borrowing ceiling.

“The rhetoric from the IMF remains positive as Pakistan continues to tick off most of the IMF boxes,” a trader said.

From the Middle East, Bahrain’s bonds were “snapping back,” another trader said. “They’re the best part of 20 basis points tighter.”

Looking to Asia, credits were mostly firm but underperformed on Wednesday morning, a London-based trader said.

“The overall tone feels defensive today, and it doesn’t seem many are buying into this rally,” he said. “Dealers are definitely cautious that U.S. accounts might sell into this again overnight.”

Also on Wednesday, China’s central bank reduced the first-time mortgage down payment requirement to 25%, the first such relaxation seen in five years, a trader said.

“Seen small demand for high-grade property names, with the sector unchanged to 3 bps tighter,” he said.

Bonds from Korea closed the early session unchanged to a couple of basis points tighter, he said.

“India is [seeing buyers] in both corporates and financials,” he said. “The sector is 2 bps to 5 bps tighter.”

Asia sees sellers

At the end of the session in New York, Asian bonds rallied and sellers attempted to make quick profits in the high-grade corporate space, a trader said.

“Indonesia’s long end rallied and lifted in the Street multiple times, closing 50 cents to 100 cents higher as the curve steepens,” he said. “China credit is still plagued by weak technical and financial sectors.”

Oil-related credits were better-offered on the short end, he said.

Petrobras, Vale benefit

From Latin America, Brazil-based Petroleo Brasileiro SA saw a five-point rally early in the day on the back of higher gas prices, a New York-based trader said.

Better buyers emerged for that name and for Brazil-based Vale SA, he said.

Late in the day, debt spreads tightened for many names from the region as the rally in equities continued, another trader said.

Brazil’s five-year credit default swaps spreads moved to 477 bps from 538 bps, while Mexico’s closed at 176 bps from 186 bps.

“The relatively stable U.S. Treasury market also meant that prices had nowhere to go but higher on the back of tighter spreads,” he said. “Lots of good two-way flows for quarter-end.”

Greece’s bank could recapitalize

Greece was back in the news amid speculation that the National Bank of Greece is looking at recapitalization proposals, another trader said. One proposal includes selling 100% of the bank’s stake in Turkey’s Turkiye Finans Katilim Bankasi AS.

“Formerly, [National Bank of Greece] planned to reduce ownership only to 60%, in line with terms the Greek lender had reached with the European Union,” he said.

Turkish banks, meanwhile, were well offered on Wednesday morning amid scant liquidity, another trader said.

Ukraine bonds weaken

From Ukraine, sovereign bonds have been weaker so far this week, given the overall tone and some profit-taking on the short end, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Demand was still around, however,” he said.

This came as the government and separatists agreed to pull bank tanks.

“Some progress in negotiations between Kiev and the self-proclaimed Donbass republics may increase investors’ appetite for Ukrainian bonds,” according to a report from Schildershoven Finance BV.

Roadshow for Gazprom

Russia’s OJSC Gazprom will set out on Oct. 5 for a roadshow to market a euro-denominated issue of notes, a market source said.

Banca IMI, JPMorgan and Unicredit Bank are leading the marketing trip.

Gazprom is a Moscow-based natural gas producer.

CDB sells notes

On Tuesday, China Development Bank priced a two-tranche issue of dollar-denominated and euro-denominated notes in a Regulation S deal, a market source said.

The $1 billion 2½% notes due in 2020 priced at 99.613 to yield 2.583%, or Treasuries plus 120 bps. The notes were talked at a spread of 110 bps to 120 bps.

The €500 million 7/8% notes due in 2018 priced at 99.856 to yield mid-swaps plus 80 bps.

Barclays, BNP Paribas, Bank of China, Deutsche Bank, HSBC, JPMorgan, Societe Generale and Standard Chartered were the bookrunners for the Regulation S deal.

The proceeds will be used for working capital and general corporate purposes.

China Development Bank is a financial institution based in Beijing.

© 2015 Prospect News.
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