Russia's Gazprom Neft, Senegal consider deals; TAQA, Qtel still trading well; volumes thin

By Christine Van Dusen

Atlanta, Dec. 18 - Russia's JSC Gazprom Neft and Senegal were mulling deals on a Tuesday that saw tighter spreads amid lower volumes as dealers shored up inventory and investors looked ahead to the holidays and the new year.

"Textbook year-end market - thin liquidity and path of least resistance higher and tighter," a London-based trader said. "The majority of curves are flattening as people extend out, chasing yield."

Said a London-based analyst, "Yesterday saw the first signs of less liquid markets with dealers unwilling to lose inventory moving into 2013. Real money continues to top up positions and corporates in particular are moving tighter with less resistance than usual, ignoring higher UST yields."

Still, the Markit iTraxx SovX index spread started the day unchanged on Tuesday, as did the corporate index.

"There's little news to greet us this morning, other than the firmer equity tone, but there are still buyers looking to put some cash to work," she said.

The recent deals from Abu Dhabi National Energy Co. (TAQA) and Qatar Telecom QSC (Qtel) continued to trade well, a trader said.

"Some demand was seen for Qtel's 2023s and Qatar National Bank's 2018s," he said. "The Qatar curve is very flat."

The primary market was mostly quiet on Tuesday, with just the possibility of international bonds in 2013 from Senegal and $2.2 billion of notes from Russian oil producer Gazprom Neft, which is part of gas company OJSC Gazprom.

"The new deals have dried up, for the most part," a Connecticut-based trader said. "The last couple of deals weren't quite as well received as we saw in the beginning of this quarter. Deals in Costa Rica and El Salvador, on the sovereign side, performed OK."

The banks played a role in this underperformance, he said, because they priced the deals aggressively, at tighter levels versus the existing curves.

"They weren't the home run-type of deals," he said.

Taking a look at the performance of emerging markets bonds during the past month, the recent perpetual notes from Abu Dhabi Islamic Bank have tightened 65 bps while DP World's 2037s have narrowed by 85 bps, a trader said.

"I'd thought, a month ago, that ADIB's perpetuals would be at 105 bid at Christmastime," he said. "We are a week away and she closes at 106 1/8 bid, 106 3/8 offered today with further strong demand this week so far. I wouldn't be surprised if other names in the first half look to do a similar style of deal, given this huge success of ADIB."

Dubai's 2022s have tightened by 87 bps and International Petroleum Investment Co.'s (IPIC) 2041s have moved in 55 bps.

Jafza Holdings, meanwhile, has seen its bonds tighten by 95 bps over the month.

"Stunning performances," the trader said. "There still exist some pockets of value, but I must admit some names and bonds look considerably less appealing at these spreads."

Morocco notes perform

Morocco's new 4¼% 10-year notes that priced at 99.228 were seen Tuesday at 100¼ bid, 100¾ offered after the previous week's levels of 99½ bid, 99.70 offered.

The sovereign's 5½% 30-year bonds that priced at 97.464 traded Tuesday at 99½ bid, 101½ offered after Thursday's 98 bid, 99 offered.

Barclays, BNP Paribas, Natixis and Citigroup were bookrunners for the Rule 144A and Regulation S deal.

Ukraine bonds strengthen

Bonds from Ukraine were somewhat stronger on low volumes, said Svitlana Rusakova of Dragon Capital.

The sovereign's 2021s were quoted at 103¾ bid, 104¾ offered while the 2022s were seen at 100¾ bid, 101¾ offered, unchanged.

Some corporate names moved higher, she said, including Metinvest's 2015s, which were quoted at 102½ bid, 103½ offered.

"Mriya Agro stood firm at 105 bid, 106 offered," she said.

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