South Africa, Angola, Dubai, Bahrain bounce on quiet day; EM investors await Fed symposium

By Christine Van Dusen

Atlanta, Aug. 29 - Bonds from South Africa, the Republic of Angola, Dubai and Bahrain managed to trade well on a Wednesday that saw many investors operating in wait-and-see mode ahead of the Federal Reserve symposium scheduled for Friday in Wyoming.

A lack of clear direction from the European Central Bank also contributed to the cautious tone. Not even positive economic data from the United States - showing faster-than-expected growth in the second quarter and a rise in pending home sales for July - could pull some investors and issuers off the sidelines.

"The market is lacking impetus until there is more clarity on central bank strategies, particularly from the European Central Bank," according to a report from Barclays Capital.

The primary market was mostly quiet on Wednesday.

"Looking forward to some supply, hopefully next week, after the United States long weekend," a London-based trader said.

Against this backdrop, Dubai-based DPWorld's 2017 notes moved 6 basis points tighter in the morning after releasing data showing that first-half net profit increased slightly to a better-than-expected $247 million, a trader said.

By the close, the notes were trading at 109.25 bid, 109.75 offered. The company's 2037 notes ended the day at 105.50 bid, 106.25 offered.

"Interesting to see the steepening of the Dubai government credit default swaps curve continue," he said. "The two-year went down at 180 with the five-year still holding above 300."

The Dubai space, as a whole, fared well on Wednesday.

"There are still pockets of value," he said.

Bahrain trades up

In other trading from the Middle East, Bahrain's 2022 notes continued to bounce. After being quoted on Tuesday night at 99.50, the notes opened Wednesday at 101.50 bid.

International Petroleum Investment Co. (IPIC)'s notes were mostly unchanged, spread-wise on the week after Fitch Ratings affirmed the company at AA with a stable outlook. And Abu Dhabi National Energy Co. (TAQA) was about 5 bps to 10 bps wider, a trader said.

"There's ongoing demand for bank paper from the region," he said. "Spreads still hold OK in this part of the world, so far."

Qatar sees some action

SoQ Sukuk A QSC, a funding vehicle set up by Qatar, saw some trading on Wednesday for its recent $4 billion issue of Islamic bonds due 2018 and 2023.

The deal included $2 billion 2.099% notes due 2018 and $2 billion 3.241% notes due 2023 that both priced at par.

On Wednesday, the 2018 notes were seen at 100.20 bid, 100.3 offered. The 2023 notes were trading at 102.20 bid, 102.60 offered.

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

South African bonds tighten

From South Africa, sovereign bonds were 7 bps tighter with good demand noted for corporate Eskom Holdings, a trader said.

Eskom's 2021 notes ended Wednesday at 113.87 bid, 114.87 offered.

"Solid demand on Eskom most of the day," he said.

Five-year credit default swaps for South Africa closed at 143 bid, 147 offered.

"Sovereign paper held well," he said.

This came against the backdrop of weakening growth for the sovereign, which is expected to cut rates next month.

Angola 'on the move'

A trader on Wednesday noted that the Republic of Angola's recent 7% notes due 2019 traded at 106 before closing at 105.62 bid, 106.37 offered. The issue priced at par on Aug. 14.

"That's on the move," he said. "It powers along."

VTB Capital was the bookrunner for the Regulation S deal.

Nigeria's Access Bank plc traded and closed Wednesday at 102.75 bid, 103.50 offered.

"Access Bank is a little stuck here but still looks OK versus [Nigeria's] GTB Finance," the trader said.

Turkish banks gain favor

Looking to Turkey, one London-based analyst remained optimistic about bonds from Isbank, Yapi Kredi and GarantiBank. She also prefers Isbank's 2016 bonds over Akbank's 2015 bonds.

"We remain constructive on the Turkish banking sector as we continue to view their balance sheets as strong with improving profitability," she said. "We view the banks as adequately capitalized and not highly levered."

Turkish banks now have better access to capital markets, given the upgrade of the sovereign rating by Moody's Investors Service.

"Our concerns remain the solid pipeline of new issues that we expect in [the second half of the year], regulatory risk that could affect banks negatively and the political risk stemming from Syria," the analyst said.

She also recommended switching from Yapi Kredi's 2015s to its 2017s and prefers Halkbank's 2017s to Vakifbank's 2017s.

KazMunaiGas, Ukraine in focus

In other trading, Kazakhstan's KazMunaiGas was 25 bps to 30 bps tighter on the day and 30 bps to 40 bps tighter on the week, a trader said.

Trading remained quiet for bonds from Ukraine, according to Dragon Capital's Svitlana Rusakova.

"The last week of summer left market players uninspired, and rare trades did not result in any significant price moves," she said. "The long end of the sovereign curve closed 1/4-point to 1/2-point higher with Ukraine's 9¼% 2017s quoted at 100.25 bid, 101.25 offered."

The sovereign's 2021 notes moved up to 93 bid, 94 offered, and Naftogaz was unchanged at 99.25 bid, 100.25 offered.

Flows continued to move toward more liquid bonds in Ukraine, such as Metinvest, Rusakova said.

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