European, U.S. economic news boosts emerging markets debt; IPIC bonds see strong demand

By Christine Van Dusen

Atlanta, Dec. 21 - Emerging markets assets tightened on Wednesday amid fairly solid economic data from the United States and Europe and in light of the news that the European Central Bank had begun bailing out euro-zone banks with its new three-year lending facility.

About 523 banks borrowed about €489 billion in funds from the funding program, giving market-watchers hope that the region's financial crisis could soon peter out.

"With some better-than-expected data out of Europe and the U.S., the glass-half-full team is being rewarded with a nice year-end rally that's filtering through to emerging Europe, Middle East and Asia also," a London-based trader said.

Most cash bonds were 5 basis points to 10 bps tighter by midday in Europe.

"News-wise in EM, it's quiet," he said. "Ukraine's 6.7% 2011 notes reached maturity. That's a bond that made and lost people a lot of money in 2008 and 2009."

And KazMunaiGaz enjoyed a decent bounce on Wednesday, tightening by 30 bps.

"Once again the majority of the buying is directed toward investment-grade emerging markets risk," he said.

Kazakhstan-based BTA Bank's 2018s were seen just above 20, he said. And bonds from Abu Dhabi-based International Petroleum Investment Co. (IPIC) were the day's favorite, with strong demand along the curve, he said.

Trading mixed

In other trading, Russia's 5% 2020 notes were seen at 102.5 bid, 103 offered while Gazprom's 5.999% 2021s were quoted at 99 bid, 99.75 offered and Vimpelcom's 7.504% 2022s were trading at 83.62 bid, 84.62 offered.

Also from Russia, Lukoil's 6.656% notes due 2022 were seen at 100.25 bid, 101.25 offered.

Meanwhile, Turkey's 5 1/8% 2022s were trading at 102.5 bid, 103 offered and South Africa's 5 7/8% 2022s were seen at 115 bid, 115.75 offered.

Middle East in focus

From the Middle East, Qatar's 4½% 2022s were quoted at 103 bid, 103.75 offered after pricing on Nov. 29 at 98.951.

The 5 7/8% 2021s from Abu Dhabi National Energy Co. - which priced on Dec. 5 at 99.515 -traded at 103.25 bid, 103.75 offered.

IPIC's 5½% 2022s were seen at 99.25 bid, par offered. The notes priced on Oct. 28 at 99.743.

No deal flow

The primary market remained shuttered on Wednesday in preparation for the Christmas and New Year's holidays.

"It's so quiet," a New York-based trader said. "I'm seeing nothing, absolutely nothing. Everyone has packed up."

When issuance resumes in 2012, "I think the most likely candidates are likely the sovereigns," he said. "But they don't traditionally mandate until right before, so we're not sure who will be coming."

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