Russian Agricultural Bank, Home Credit, Banco de Credito del Peru sell notes on slow trading day

By Christine Van Dusen

Atlanta, March 11 - With the market's attentions turned toward international events both man-made and natural - including the continued strife in the Middle East and a devastating series of earthquakes in Japan - emerging markets asset prices stayed fairly still and the pace of issuance was slow on Friday.

Among the few issuers to print notes were Moscow's OJSC Russian Agricultural Bank and Home Credit and Finance Bank LLC, as well as Lima's Banco de Credito del Peru.

"EM assets remained under pressure this week, unable to muster any lasting positive momentum," according to a report from RBC Capital Markets. This reflects "the generally unsettled nature of global financial markets of late."

The JPMorgan Emerging Markets Bond Index Plus spread started the day about 8 basis points wider at Treasuries plus 265 bps but undulated throughout the day.

"The EMBI has gone from 260 bps in to 245 bps and back out at 265 bps as euro zone fears, Saudi Arabia protests and less impressive U.S. data combine to dent sentiment," a London-based trader said.

Said a New York-based market source: "There's a lot of uncertainty out there. The market's in a state of gridlock at the moment."

Prices stand still

In trading on Friday, prices - particularly on BBB-rated credits - didn't move much, a New York-based market source said.

"They're very subject to Treasury moves," he said. "It's quite a bit tighter, but I don't think there's any natural demand. I think there's just not a lot going on."

Whereas on previous days the market saw some selling, that activity slowed on Friday.

"Flows are pretty balanced," he said. "And it's all really spread out. It feels like guys are getting some money in. But it's weird. One account yesterday asked for a small bid list that had five names, then had an offered list with three of those five names in it. I guess accounts are getting money in and closing down within big funds, and some accounts are adding to their positions in small ways."

The recent Treasury moves "caught a lot of guys off-guard," he said.

Russian lenders do deals

Moscow-based lender Russian Agricultural Bank priced RUB 20 billion notes due March 17, 2016 at par to yield 8.7%, a market source said.

The notes priced in line with talk, which was set in the 8.7% area.

Deutsche Bank, JPMorgan and VTB Capital were the bookrunners for the Regulation S deal.

"That's had a nice pop, up 5/8 of a point," a London-based trader said.

In another new deal from Russia, Home Credit and Finance Bank sold $500 million notes due March 18, 2014 at par to yield 7%, at the tight end of talk of 7% to 7¼%.

Citigroup and Credit Agricole were the bookrunners for the Regulation S-only deal.

"That's up a ¼ point," he said.

BCP prints notes

Also on Friday, Lima, Peru-based lender Banco de Credito del Peru priced $700 million 4¾% notes due March 16, 2016 at 99.815 to yield 4.792%, or Treasuries plus 275 bps, a market source said.

Bank of America Merrill Lynch and JPMorgan were the bookrunners for the Rule 144A and Regulation S notes, which priced in line with talk in the Treasuries plus the high-200 bps area.

As of late Friday, the notes were trading down 1/8 of a point, a New York-based trader.

Hong Leong sells bonds

This deal followed Thursday's pricing of Malaysia-based lender Hong Leong Bank Bhd.'s $300 million 3¾% notes due March 17, 2016 at 99.761 to yield 3.803%, a market source said.

Barclays Capital, RBS and Standard Chartered were the bookrunners for the Regulation S-only notes. Proceeds will be used for working capital and for general banking purposes.

The New York-based market source was surprised to see so few issues come to market on Friday.

"You would think that some issuers that were 40 bps or 35 bps off the high yield of the year would take advantage of lower yields and come out with some issuance," he said. "But we're not really seeing that."

Hungary plans roadshows

In other deal-related news on Friday, Hungary selected BNP Paribas, Citigroup and Deutsche Bank for a roadshow that will begin March 17, according to an announcement from the sovereign.

Also planning a roadshow was Thailand-based petroleum exploration and production company PTT Exploration and Production PCL, with Barclays Capital, a market source said.

In November the company announced plans for an $800 million issue of notes via Deutsche Bank and UBS, with proceeds to fund part of its current investment plan.

And Turkey-based lender Turkiye Vakiflar Bankasi TAO (VakifBank) is planning between $500 million and $1 billion of five-year notes, a market source said.

This comes as Turkey's performance has improved.

"Turkey is still trading very well, with the sovereign 10-year benchmark back inside Z spread plus 200 bps," he said.

IPIC selling slows

The three-tranche issue of notes from Abu Dhabi-based oil investment entity International Petroleum Investment Co. remained in focus on Friday. The deal, which priced on Wednesday, included £550 million 6 7/8% notes due 2026 that priced at 99.506 to yield Gilts plus 270 bps and €1.25 billion 4 7/8% notes due 2016 that priced at 99.379 to yield OBL plus 244.8 bps.

The deal - via Goldman Sachs, Banco Santander, BNP Paribas, Credit Agricole, Deutsche Bank and UniCredit - also included €1.25 billion 5 7/8% notes due 2021, which came to market at 98.737 to yield DBR plus 276 bps.

On Thursday the notes saw rampant selling, a trader said. On Friday "the frenzied selling abated," he said. "The 2021s remain the underperformer, going out at 981/2, down a ½ point from the launch."

Funds see outflows again

Emerging markets bond funds saw net outflows of $260 million for the week ended March 9, according to data tracker EPFR Global. That's compared to the $4 million outflows seen during the previous week.

"With sustained fighting in Libya keeping the pressure on oil prices and sovereign debt in the euro zone back in the spotlight for many of the wrong reasons, investors had plenty of reasons to be cautious in early March," EPFR said in its report. "Some investors are concerned that heavy issuance over the next few weeks will squeeze returns for this asset class, which is already under some pressure due to events in the Middle East and North Africa."

The week's flows were heavily influenced by redemptions from one big local currency fund, said EPFR senior analyst Cameron Brandt.

"But hard currency funds did post solid inflows, reflecting the reassessment of the currency stories in markets such as Turkey, South Africa and Korea, which import most of their oil," he said.

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