Emerging market debt muted Monday; Cosan prices $200 million notes due 2009

By Reshmi Basu and Paul A. Harris

New York, Oct. 18 - Trading in emerging markets was muted Monday as investors shifted into neutral on market jitters.

"With oil prices the way they are and an upcoming [U.S.] presidential election, investors are playing safe," said a trader.

"No one is making a move one way or the other," he said.

As a result, secondary trading was nearly non-existent during Monday's session.

The Brazil C bond was down 0.125 to 99 1/8 bid while the bond due 2040 was unchanged at 113.10 bid. Mexico's bond due 2008 gained half a point to 114.55 bid. The Russia bond due 2030 added 1/8 to 98 7/8 bid. And Venezuela's bond due 2027 was up a point to 103 bid.

"EM was a little bit lower today [early Monday]," said a second trader. "It was down in the morning and came back - pretty much to where we closed on Friday.

"I think this was a follow-through on selling this morning," he said.

"It's been dead quiet throughout the day."

Overall, the JP Morgan EMBI+ Index rose 0.05%. Its spread to Treasuries was unchanged at 412 basis points.

"Emerging markets has been following its own path, not so much Treasuries," the first trader said.

U.S. Treasuries prices were little moved in trading Monday. The yield on the 10-year note finished the session at 4.05%, unchanged from Friday.

U.S. Federal Reserve Governor Mark Olson said on Monday record high oil levels have hurt the economy.

"Currently the economy is not as strong as we would have thought it would be six or eight months ago, but it is still improving," Olson said.

After hitting another record high at $55.33, oil closed the day at $53.67 a barrel, on the New York Mercantile Exchange.

Looking ahead, investors will be eyeing Tuesday morning's release on U.S. consumer prices in September.

More roadshows added, Cosan prices

Two more corporates added roadshows to the calendar.

Out of Kazakhstan, Intergas Central Asia will start a roadshow for its $200 million seven- to 10-year bonds (Baa3/BB) on Thursday in Boston.

The roadshow will move to New York on Friday, then Zurich and Frankfurt next Monday and wrap up in London next Tuesday.

ABN Amro and JP Morgan are running the Rule 144A/Regulation S bond offering.

Also, South Korea's Chohung Bank will start a roadshow for its $400 million 10-year subordinated debt in Hong Kong on Wednesday.

Citigroup and UBS Investment Bank are running the Rule 144A/ Regulation S deal.

Chohung, based in Seoul, is a banking unit of Shinhan Financial Group.

Brazil's Cosan SA Industria e Comercio, a sugar producer, priced $200 million senior notes due 2009 (Ba3/NR) at 99.011 to yield 9¼% or 593 basis points more than comparable Treasuries via Morgan Stanley and Credit Suisse First Boston.

A market source said the deal priced inside of the 9 3/8% to 9½% price talk and that the book was oversubscribed.

Meanwhile Indonesia's Bank Mandiri may abandon its plans to issue a $150 million eurobond (B2/B) in favor of a loan.

"The loan market continues to be hot, in emerging markets," said a market source.

"Unless you are a corporate issuer that needs a longer maturity there is not much that would push you to the external bond market as opposed to doing something domestically in your own market or else in the bank market."

Moving ahead, investors will pay close attention to decisions made by both Brazil's and Mexico's central banks.

"I think most of us think that Brazil will tighten," said the source.

"Mexico will probably stay the same," he added.

Also, the source added that Argentine government is expected to file its debt exchange proposal with the Securities and Exchange Commission this week.

"The deal is expected to be a bit better."

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