Industrial Bank of Korea, Croatia, Tanzania plan deals; Ukraine, Petrobras get attention

By Christine Van Dusen

Atlanta, Feb. 25 – Industrial Bank of Korea set talk, Croatia planned a roadshow and Tanzania renewed efforts to issue bonds on Wednesday as investors remained focused on Ukraine and considered selling bonds from Brazil-based Petroleo Brasileiro SA (Petrobras).

“Headlines suggest fighting in Ukraine has subsided, with sporadic rebel attacks,” a London-based analyst said. “At the same time, yesterday saw increasingly aggressive rhetoric on sanctions from the West.”

If fighting picks up this week, it is likely the United States could institute more sanctions against Russia.

“European leaders have been putting pressure on Russia as well, but we continue to believe obtaining unity on sanctions in Europe will prove difficult given Greece’s attitude,” he said.

Sovereign bonds widened Tuesday on the news and were unchanged on Wednesday morning, as were credit default swaps spreads, he said.

Investors were also watching Petrobras, which was cut to junk by Moody’s Ratings Service as a result of the continuing corruption scandal, a New York-based trader said.

“Could produce some heavy forced selling from accounts,” he said. “And a move to junk by one more ratings agency will solidify that forced selling.”

From Turkey, spreads tightened on Tuesday after the Central Bank cut rates, as expected, and on Wednesday narrowed further, a trader said.

And bonds from Central and emerging Europe were firm, with some spreads as much as 5 basis points tighter, he said.

Looking to the Middle East, the session was busy, with support shown for long-dated assets, a London-based trader said.

“Perpetuals are popular still,” he said. “Active on Lebanon across the curve, with the long-dated 2030 going through between 100¾ and 101.”

Recent issues trade up

Abu Dhabi-based First Gulf Bank PJSC’s 2 5/8% notes due 2020 that priced at 99.549 traded near par on Wednesday, a trader said.

And Dubai-based National Bank of Ras Al Khaimah’s (RAKbank) 3¼% notes due in five years that priced at 100.875 closed at 101.

In other trading, sovereign paper from Africa saw strong demand, he said.

“Flow-wise, fairly balanced, all told,” he said.

Corporates from Asia stay firm

Asian bonds put in a firm session on Wednesday, with more balanced flows as high-grade bonds closing unchanged to 3 bps tighter, a trader said.

“Real-money demand remained strong, especially in the longer maturities,” he said.

Oil companies from China saw their bonds tighten slightly while Korea was quiet and unchanged, he said.

“Onshore accounts are sidelined at these yield levels,” he said.

Property companies from China were ¼ point to ¾ point higher as investors sought out risk, he said.

Asian sovereigns in focus

Bonds from India were unchanged to 5 bps tighter, with retail investor demand sighted, the trader said.

“High yield sovereigns opened ¾ point higher after U.S. Treasuries rallied overnight,” he said. “The Philippines long end closed ¾ point to 1 point higher, the belly a ½ point, with local banks shortening duration and fading the rally.”

The curve for Indonesia was strong, he said, with the long end 1 point to 1¼ point higher and the belly a ½ point higher, he said.

“Buyers on dips,” he said.

Guidance from Korean bank

Industrial Bank of Korea set talk in the mid-swaps plus 115-bps area for a five-year issue of Australian dollar-denominated notes, a market source said.

ANZ, Nomura Securities and UBS are the bookrunners for the deal, which is expected to price Thursday.

Croatia sets roadshow

Croatia will set out on March 2 for a roadshow to market a euro-denominated issue of benchmark-sized notes, a market source said.

Barclays, Erste Group, JPMorgan and UniCredit/Zagrebacka banka are the bookrunners for the Regulation S deal.

The roadshow will begin in London and conclude on March 3 in Germany.

Tanzania could issue notes

Tanzania is looking to issue dollar-denominated notes in April or May, a market source said.

The sovereign has been talking about issuing notes since 2008. In 2013, officials announced plans for up to $2 billion of notes. The size was then changed to a maximum of $700 million and the timing to the first half of 2014. The size was changed again, to between $500 million and $1 billion, but the deal did not materialize.

Ivory Coast attracts orders

The final book for Ivory Coast’s $1 billion 6 3/8% notes due March 3, 2028 was about $4 billion, a market source said.

The notes came to the market on Tuesday at 97.955 to yield 6 5/8%, or Treasuries plus 463.7 bps.

BNP Paribas, Citigroup and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S notes, which will have three equal redemption payments in 2026, 2027 and 2028.

“They are trading very well, up 1 point to 1½ points from reoffer,” a trader said.

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