Philippines prints notes as Japan, Bahrain worries fade; spreads tighten; RHB plans notes

By Christine Van Dusen

Atlanta, March 21 - The Republic of the Philippines sold notes on a Monday that saw emerging markets issuers and investors gaining confidence - and risky assets rallying - even as the cease-fire in Libya proved to be a misnomer.

"EM seems less worried, more grateful that the Japanese crisis appears to be abating," a London-based market source said. "So as U.S. Treasuries keep selling off, with the 10-years at 3.32%, we continue our grind in."

The JPMorgan Emerging Markets Bond Index spread tightened 3 basis points on Monday morning to Treasuries plus 270 bps before finishing the day narrower by 9 bps, with Argentina tighter by 27 bps, Ukraine by 23 bps and Venezuela by 23 bps.

"Markets have started the week on a cautiously optimistic note," according to a report from RBC Capital Markets. "Japanese officials have announced that conditions at the nuclear station have continued to improve over the weekend, and this has been enough to provide support to risk assets so far today."

Trading activity, however, remained thin on Monday.

"Volumes are light, but with a fairly firm tone," a trader said.

Philippines prices notes

The Philippines' $1.5 billion 5 ½% notes due March 30, 2026 came to market Monday at 99.495 to yield 5.55%, or Treasuries plus 223.8 bps, a market source said.

Citigroup, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan and UBS were the bookrunners for the off-the-shelf notes.

Proceeds will be used for general governmental purposes, including budgetary support.

This followed the Friday pricing by state-owned lender Development Bank of the Philippines of $300 million of 5½% notes due March 25, 2021, which came to market at 99.924 to yield Treasuries plus 225.1 bps, a market source said.

Credit Suisse, Goldman Sachs, HSBC and JPMorgan were the bookrunners for the Regulation S notes.

Bahrain sees bids

The better news from Japan helped draw attention away from the continuing troubles in Bahrain and got the week off to a fairly solid start for Middle Eastern issuers, a London-based trader said.

"Bahrain paper is once again fairly well supported, with the Bahrain 2020s closing at 93 bid, 93.50 offered, about 11 bps tighter," he said.

He also saw some bids on Bahrain Mumtalakat Holding and Central Bank of Bahrain, but little interest in BBK Bahrain.

And the Egypt 2020s were finding some interest in the 93.25 bid, 93.75 offered area, he said, even after the sovereign's recent downgrades.

Dubai in demand

Investors were also seeking out Dubai paper on Monday, with Dubai Water and Electricity Authority's 2020s underperforming Dubai's 2020s by about 10 bps.

"We're also seeing some small nibbling on Morocco, Tunisia and Jordan, though the latter is stuck in this 91.50 bid, 92.50 offered range," he said. "Bearing in mind we've not completely seen a resolution in Bahrain or Libya, I still tend to like fading rallies here while maintaining longs in those names I like, hedged with the U.S. Treasuries, of course."

The possibility of a protracted war in Libya, as threatened by leader Moammar Gaddafi, in general "had little impact on risky assets today," said Gavan Nolan, an analyst with Markit, in a report.

"But it probably contributed to the price of oil staying above $115 a barrel, and if it approaches $120 again then it will surely have a bearing on spread direction," he said.

IPIC in focus

One market source was continuing to watch the recent three-tranche issue of sterling- and euro-denominated notes from Abu Dhabi-based oil investment entity International Petroleum Investment Co. that priced March 9.

The deal included £550 million 6 7/8% notes due March 14, 2026 at 99.506 to yield Gilts plus 270 bps, €1.25 billion 4 7/8% notes due March 14, 2016 that priced at 99.379 to yield OBL plus 244.8 bps and €1.25 billion 5 7/8% notes due March 14, 2021 that priced at 98.737 to yield DBR plus 276 bps.

"Middle East markets are also trading firmer, with even the IPIC flipping showing signs of abating," the London-based market source said. "Given how crazy-tight the Gazprom euro notes are trading, these IPIC bonds will surely perform over time."

Russian Railways opens higher

Another recent issue - the £350 million of notes due March 25, 2031 from OAO Russian Railways Co. that came to market Friday at par to yield 7.487%, or Gilts plus 325 bps - saw some tiny gains on Monday morning.

Barclays Capital, Goldman Sachs and VTB Capital were the bookrunners for the Regulation S deal, which priced in line with talk set at the Gilts plus low 300 bps area.

"Those notes are opening up a ½ point on low volume," the London-based market source said.

RHB plans notes

In deal-related news on Monday, Malaysia-based lender RHB Bank Bhd. is planning an issue of $300 million to $500 million senior notes, a market source said.

Bank of America Merrill Lynch and Goldman Sachs are the bookrunners for the deal, which is expected to price in April.

And China-based property developer SPG Land Holdings Ltd. has postponed its planned issue of $200 million five-year notes, a market source said.

Morgan Stanley and Nomura were the bookrunners for the Regulation S-only notes, which were marketed during a roadshow earlier this month.

Croatia issue oversubscribed

The final book for the Republic of Croatia's $1.5 billion 6 3/8% notes due 2021 - which came to market Wednesday at 98.25 to yield 6.617%, or Treasuries plus 340 bps - was more than $6 billion, a market source said.

The Rule 144A and Regulation S notes via Barclays Capital, Deutsche Bank and JPMorgan priced in line with talk, which was set at the Treasuries plus 350 bps area.

About 58% of the orders came from the United States, 20% from the United Kingdom, 19% form Europe and 3% from Asia and others. Fund managers and banks accounted for 13%, hedge funds 5% and insurers and pension funds 4%.

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