New issuance slow, trading thin before holiday weekend; Promsvyazbank sells six-year notes

By Christine Van Dusen

Atlanta, July 2 - Emerging markets trading ended the week with a bit of a whimper as new bond issuance continued its plodding pace and trading was somewhat thin in advance of the July 4 holiday weekend.

"There was an unofficial early close," a New York-based market source said. "There really was nothing today. It's very quiet."

A London-based trader agreed: "It's pretty dull."

Already low yields on 10-year Treasuries barely moved on Friday on the news that non-farm payrolls in the United States dropped 125,000 in June, according to a U.S. Labor Department report released Friday. Part of the drop was attributed to the fact that many hires in May were temporary, for the 2010 census.

"The payroll numbers came out in line with what people expected," the New York market source said.

That sent investors in search of safe-haven assets, but at the same time emerging market debt "tended to be better bid and outperforming others," the New York source said. "There are a number of deals and roadshows that are coming, so I think next week has the potential to be a pretty active week if the markets hang in there."

Promsvyazbank prices notes

One deal did sneak in on Friday: Moscow-based financial services company Promsvyazbank priced $200 million notes due 2016 to yield 11¼%, in line with talk, via Citigroup, PSB and RBS.

The new bonds didn't inspire a lot of enthusiasm, though.

"It's very small," the London trader said of the Promsvyazbank issuance.

The issuer joined the growing list of Russian banks that have recently brought deals to market, including Vnesheconombank's $1 billion 6.902% notes due 2020 that priced at par to yield Treasuries plus 400 basis points and Sberbank's $1 billion 5.499% notes due 2015 that priced at par to yield mid-swaps plus 345 bps.

All of these corporates are capitalizing on a fairly hospitable climate for the sector, given that the sovereign's economy is growing and bank deposits are increasing, a source said.

Up next, market sources say, could be a planned issue of notes from Moscow-based commercial bank TransCreditBank via JPMorgan and BNP Paribas.

Issuance could pick up

Also on the radar screen are Kuwait City-based investment firm Kuwait Projects Co., which finishes a roadshow on July 6 with BNP Paribas and HSBC; Warsaw-based natural gas company Polskie Gornictwo Naftowe i Gazownictwo, with up to PLN 3 billion in bonds with maturities ranging from one month to one year; and Indonesian telecommunications company Indosat, with a dollar-denominated offering of fixed-rate senior notes due 2020.

The coming weeks could also see more activity out of once-hot but lately cold Latin America.

Market-watchers are whispering that Brazilian steel company Siderurgica Nacional will soon go on a roadshow, as will Brazilian airline Linhas Aereas Inteligentes.

These issuers, like Banco Cruzeiro do Sul before them, may be responding to the fact that bond yields for Brazilian corporates have jumped recently in advance of the October presidential elections.

Indeed, the Cruzeiro deal - $200 million 7% notes due 2013 that priced Thursday at 99.337 to yield 7¼% - was "oversubscribed by approximately 20%," according to Fausto Vaz Guimaraes Neto, a company spokesman. "The distribution was 40% in Europe, 40% in the U.S. and the remaining 20% in other regions."

Trading mixed, tighter

On Friday "the tone was tighter," the London trader said.

The $1 billion 6.902% notes due 2020 from Moscow-based lender Vnesheconombank that priced Thursday at par to yield Treasuries plus 400 bps was "active" on Friday morning.

"VEB is up about a point," the London trader said. "It is 101 to 101.20, basically."

And Bahrain Mumtalakat Holding's $750 million issue of 5% notes due 2015 that priced last week at 99.077 to yield 5.212%, or mid-swaps plus 300 bps, was trading at 98.625 to 98.75 on Friday, he said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.