Roadshows, pipeline additions point to busy month for new deals; thin trading ahead of jobs data

By Reshmi Basu and Paul. A Harris

New York, Sept. 1 - September looks to be a sizzling month for new offerings of emerging markets debt as several issuers announced roadshows and a number of others added to the pipeline

Meanwhile, secondary trading, as expected, was nearly nonexistent ahead of Friday's release of non-farm payroll numbers.

In the primary, four new roadshows were announced.

Bank of Moscow resurrected its $200 million three-to-five-year loan participation notes offering (Ba2/BB) via ABN Amro and Merrill Lynch.

The roadshow starts Thursday in Hong Kong.

The Regulation S deal was postponed on July 29.

Russian Standard Bank will start a roadshow for $200 million of three-year notes (Ba3/B) on Sept. 8 with marketing continuing through Sept. 15.

Dresdner Kleinwort Wasserstein and ING are joint bookrunners for the Regulation S deal.

And out of Asia, the Union Bank of the Philippines will roadshow a planned $100 million to $150 million offering of three-year senior bonds (Ba2) in Asia.

UBS and Credit Suisse First Boston are the lead managers for the proposed offering.

Industrial and Commercial Bank of China (Asia) Ltd. will start a roadshow for its $300 million notes offering (A2) on Sept. 6.

The roadshow, which will be in Asia, runs through Sept. 8.

JP Morgan, Goldman Sachs and HSBC are running the Regulation S deal.

And three issuers added to the pipeline.

Kazahkstan's Kazkommertsbank plans to issue $300 million five-year notes (Baa2/BB-) in the third quarter.

Russia's Norilsk Nickel plans to issue $500 million bonds via Citigroup and Morgan Stanley in another revival of a previously delayed deal.

And Canada's PetroKazakhstan Inc. plans to issue $150 million 10-year notes (Ba3/B+) via JP Morgan. The company is the largest supplier of refined products in Kazakhstan and owns one of the three refineries in that country.

Trading flat ahead of Friday's job numbers

During Wednesday's session, emerging markets debt took its cue from the U.S. Treasuries market.

Treasury prices ended flat after Tuesday's rally. For the day, the yield on the 10-year Treasury note stayed at 4.12%.

In thin trading, emerging market paper was slightly lower to flat.

Russia's bond due 2030 was down 0.625 to 95¼ bid. Mexico's bond due 2008 was bid at 115.30, down 0.05. The Brazil C bond was down 0.125 to 97.875 while the bond due 2040 was bid at 106.70, down 0.30.

In general, trading in Latin America bounced along with U.S Treasuries, according to Enrique Alvarez, Latin America debt strategist for think tank IDEAglobal.

"Volumes have been lackluster," Alvarez commented.

Brazil failed to edge higher, despite more positive economic numbers. The trade ministry reported a trade surplus of $3.43 billion in August, which brings the year-to-date surplus to $21.95 billion.

"You had very good trade numbers in Brazil, and that seemed to set the early tone," said Alvarez.

"But after that, it was back to Treasury watching.

"And people seem to be very hesitant to take on additional risk or heavily skewed positions one way or another before Friday's data," he noted.

Market expectations place the non-farm payroll numbers at 150,000 to 200,000 jobs created, most likely hitting the top of the range.

If the numbers fall within that range, the reaction will either be flat trading or a little profit taking because the U.S Treasuries are bound to come off, according to Alvarez.

"There is supply coming next week. And the Treasury market in the U.S seems to be a little overextended," he said.

"Beyond that, you always have the possibility for surprises as there was last month."

In July, the economy added a paltry 32,000 jobs, boosting emerging market paper on hopes that U.S. interest rates will not need to raise as quickly as previously thought.

"The market seems to be betting that the surprise will be on the downside - that we have subdued payroll growth again.

"But that's a real question mark."

While some of the recent economic data seems weak, there are some conditions that point to a job rebound, notes Alvarez.

"If that is the case, I don't think we are prepared to absorb the large move in the Treasury market.

"That will bring in some profit-taking to the market."

Standoff in Argentina

On Tuesday, street violence erupted during difficult discussions between International Monetary Fund's managing director Rodrigo Rato and Argentine president Nestor Kirchner.

After the meeting, Rato said that Argentina must restructure its 2001 defaulted debt and engage in sound economic policies in order to attract the investment needed to jumpstart the country's flagging economy.

Rato also said he would consider a request by Argentina to delay up to $1 billion in debt payments to the IMF.

"The relationship with the government did not seem to move forward in any way, shape or form because he [Rato] went back to demanding a higher fiscal surplus for 2005," said IDEAglobal's Alvarez.

"This is basically what the IMF has been demanding for a while but it falls on deaf ears, because Kirchner turns right around and says, 'Don't even dream about it.'"

"It's a moot point. There doesn't seem to be any real advance," he added.

The meeting has done little to impact Argentine bond prices.

"Today [Wednesday], maybe they've rolled off another tenth of a point, maybe a quarter at the most, but nothing significant," Alvarez noted.

The market expected little change, anticipating the standoff would continue between the two protagonists, he said.

"The Argentine government or Mr. Kirchner does not want to budge from where he is standing."

The Argentina bond due 2008 was unchanged at 29 bid.

Latin American corporates trading flat

Overall, prices for Latin American corporates were flat during Wednesday's session.

Mexican paper product company Corporacion Durango SA de CV's bond due 2009 was unchanged at 56 bid, 58 offered.

Brazilian petrochemical company Braskem's bond due 2008 was unchanged at 106½ bid, 108 offered.

And Argentina's Telefonica Movil's bond due 2006 was unchanged at 103 bid, 104 offered.

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