Investors focus on ECB's next steps; VTB prints bonds; Dubai, Bahrain, Qatar spring back

By Christine Van Dusen

Atlanta, Aug. 28 - Russia's VTB Capital SA priced notes on a slightly more active Tuesday after European Central Bank president Mario Draghi canceled plans to attend this Friday's Federal Reserve symposium in Wyoming, sparking speculation that the ECB is working on a significant economic plan.

"Liquidity was extremely low yesterday but should recover a little today following Monday's UK bank holiday," according to a report from Erste Group Research.

Said a London-based trader, "There was a little more activity today than I expected. However, overall it remains at times a very thin market."

Some market-watchers believe that at the Jackson Hole symposium Fed chairman Ben Bernanke will discuss further quantitative easing. But others don't expect to learn any details of a bond-buying plan.

"The absence of details will also push markets down," according to a report from UFS Investment Co. "We retain a rather negative outlook for the following weeks and recommend staying out of the market. However, we expect the bond-buying program to be implemented in the medium-term one way or another."

Some further quantitative easing could be launched at year-end, UFS said.

Investors will next focus on the Sept. 6 meeting of the ECB, at which officials are expected to speak generally about possible bond buying.

"It did feel like more people were back at the desk, post-summer and Ramadan, but beware the US long weekend upcoming," a trader said. "Hopefully, come next Tuesday, we will have more depth to the market. But it was a solid effort overall today, and not many bonds are wider on the month."

VTB sells notes

Meanwhile, the morning's tone was negative for bonds from Russia, which saw its 2030 bonds decline by 1.1% while investment bank VTB priced CHF 600 million 3.15% notes due 2016 at par.

BNP Paribas, Credit Suisse and VTB were bookrunners on the deal, the company's fourth issue of Swiss franc bonds.

"This offering was oversubscribed," said Herbert Moos, deputy chairman and chief financial officer, in a statement. "The new deal continues our successful track record of diversifying our investor base in terms of both geography and currency."

Middle Eastern names bounce

From the Middle East, some paper from Dubai names traded well on Tuesday, with demand noted for the sovereign's 2014 notes and Dubai and Water Electricity Authority's 2015 notes.

"The latter still looks OK, to my mind," the London trader said. "Dubai Holding too can also surprise more to the upside, despite a stunning run, 120 basis points tighter on the month."

Bahrain bounced with its 2022 notes at 101.50 bid after recently trading at 99.50.

"Qatar sukuks have also bounced nicely - albeit boosted by the US Treasury move - with the 2023s trading at decent size between 102.25 and 102.50," he said. "The 2018 Qatar holds steady at 100.20 bid, 100.35 offered at the close."

Middle East in focus

International Petroleum Investment Co.'s 2022 bonds - which closed Wednesday at 111 bid, 111.25 offered after April's level of 104 - were trading Tuesday at 112.12 bid, 112.62 offered.

Dubai's Emirates airline saw its 2016 notes trade at 103 bid, 103.50 offered on Tuesday morning.

"That just doesn't move," a trader said. "It's 3 bps wider on the month."

And National Bank of Abu Dhabi's 2019 notes traded Tuesday at 99.65 bid, 99.95 offered after last week's 99.50 bid, 99.75 offered.

Egypt, Investec see action

Also on Tuesday, Egypt's 2020 notes were quoted at 101.50 bid, 103.50 offered after last week's level of 101.25 bid, 103.25 offered. The sovereign's 2040 notes - which traded last week at 93 bid, 95 offered - were seen Tuesday at 94.12 bid, 95.12 offered.

South Africa's Investec Ltd., which recently experienced selling of its 2017s, saw the notes trade Tuesday at 97.50 bid, 98.50 offered. On Thursday of last week the notes were trading at 97.62 bid, 98.62 offered. The notes priced at 99.775 to yield Treasuries plus 310 bps.

In other trading, the corporate sector from Ukraine has been quiet, with Metinvest's 2015 notes trading near 99.50 bid, 100.50 offered, according to a report from Dragon Capital. Ukraine's DTEK traded at 99.75 bid, 98.75 offered.

Aleesia Forni contributed to this article.

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