Investors distracted, but EM bonds end on positive note; Abu Dhabi lender notes trade well

By Christine Van Dusen

Atlanta, Aug. 8 - Emerging markets debt finished Wednesday on a fairly solid note - albeit a quiet one - as the summer doldrums and the Olympic Games distracted investors who seem willing to embrace risk, given that no negative global economic reports were released during the session.

"The market is very technical and still feels like a lot of dealers have similar positions," a London-based trader said. "Volumes remain light, but we all know why."

Investors should be cautious about chasing the "low volume 'wall of worry' August rally," according to a report from Barclays Capital.

A small amount of Street selling was seen for Abu Dhabi-based International Petroleum Investment Co., a trader said.

"The longer-dated dollar bonds were hit," he said.

He also noted light selling of Dubai-based Jebel Ali Free Zone (Jafza), as well as Dubai Water and Electricity Authority's 2020 bonds and Abu Dhabi National Energy Co.'s (TAQA) 2019 notes.

"Lebanon seems to be picking up a little more interest lately, having been in a slumber of late," he said.

Dar al Arkan's 2015 notes "hit a wall at 108, struggling to muster any sort of move higher," he said. "Unlike Dubai Holding's 2017s, which push 170 basis points tighter on the month."

Meanwhile, bonds from Central and Eastern Europe were weak, with local currency bonds outperforming euro bonds, a Vienna-based market source said.

NBAD notes perform

Also on Wednesday, the $750 million issue of 3% notes sold by National Bank of Abu Dhabi at 99.731 was trading at 99.90 bid, par offered and was later seen at 99.95 bid, 100.05 offered.

The notes were priced to yield mid-swaps plus 180 bps via Citigroup, JPMorgan, Standard Chartered and National Bank of Abu Dhabi in a Regulation S-only deal.

The 2017 notes from Saudi Electricity Co. that traded last week at 102.25 bid, 103 offered were seen Wednesday at 103 bid, 103.50 offered.

The company's 2022 notes - quoted last week at 108.62 bid, 109.37 offered - were trading Wednesday at 109 bid, 109.50 offered.

"The recent NBAD is doing well, with most flow going through at the 100 level," a trader said.

Qatar bonds widen

The recent $2 billion 2.099% notes due 2018 from Qatar funding vehicle SoQ Sukuk that priced at par were in focus on Wednesday, a trader said.

The notes traded last week at 100.25 bid, 100.40 offered and were seen Wednesday morning at 100.50 bid, 100.70 offered.

During the European afternoon, the 2018 notes were trading at 100.50 bid, 100.65 offered.

The second tranche of that deal - $2 billion 3.241% notes due 2023 that also priced at par - was quoted early Wednesday at 102.55 bid, 102.85 offered.

"That's one bp wider," a trader said.

Later the notes were seen at 102.50 bid, 102.80 offered. Last week the notes were quoted at 102.50 bid, 102.75 offered.

Barwa Bank, Deutsche Bank, HSBC, QInvest and Standard Chartered Bank were the bookrunners for the Regulation S deal.

Africa in focus

In other trading on Wednesday, the $350 million issue of 7¼% notes due 2017 from Nigeria's Access Bank plc, which recently priced at par, was trading at 99.50 bid, par offered.

The yield was set at 7¼%, or Treasuries plus 665 bps.

The notes closed Wednesday at 99.75 bid, 100.25 offered.

Citigroup and Goldman Sachs were the bookrunners for the Rule 144A and Regulation S deal.

And five-year credit default swaps for South Africa were trading Wednesday in the high 120s, a trader said.

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