Turkey prices notes as risk aversion rises on European economic worries; Ukraine improves

By Christine Van Dusen

Atlanta, Oct. 17 - After a week of optimism about the European economic crisis, emerging markets investors did an abrupt about-face on Monday, avoiding risk and worrying that a solution may be a long way off.

"The market burst out of the gates first thing before fading the longer the day went on," a trader said. "Another mixed bag, performance and spread wise, but if you'd asked me at 9:30 a.m. it was all very well bid but since faded."

Still, some bonds managed to put in a decent performance on Monday, including paper from Ukraine, Russia and OJSC Gazprom.

And the Republic of Turkey priced a $1 billion issue of bonds while other issuers dipped a toe into the waters of the primary market, including Abu Dhabi-based International Petroleum Investment Co. PJSC, Brazil's Centrais Eletricas Brasileiras SA (Eletrobras), Hong Kong's Cathay Pacific Airways Ltd., Peru's Volcan Compania Minera, China's CNPC Golden Autumn Ltd. and Russia's OJSC Alrosa Co. Ltd.

"Some supply is printed and ready," a trader said. "More names are sniffing."

In its new deal, Turkey priced a $1 billion issue of 5 1/8% notes due March 25, 2022 at 98.94 to yield 5.259%, or Treasuries plus 310 basis points, a market source said.

Bank of America Merrill Lynch and HSBC were the bookrunners for the Securities and Exchange Commission-registered deal.

The sovereign's bonds had a strong start to the trading day but faded.

"It looks like the new 10-year deal is coming with circa 25 bps premium to the curve, which may not be a great spread but seems to be a fair one," a trader said. "Elsewhere, retail investors were nibbling banks in small amounts again but generally the activity was relatively low."

Ukraine performance 'decent'

In other trading on Monday, Ukraine improved.

"It's a decent performance from the Ukraine," a trader said. "We're seeing quite good demand on MHP SA's 2015s today from retail investors as on the wires it's reported that MHP's sales volume is up 13%."

And Russia's 2030s powered back to 117, he said.

"It's now virtually unchanged on the month," he said. "It's a solid tone, and we're only really seeing buyers to start."

Gazprom sells notes

Russia's quasi-sovereign names put in a strong performance during the session, with Gazprom outperforming following the Friday pricing of a $200 million issue of zero-coupon notes due April 23, 2012 at 98.233 to yield 3½%, a market source said.

UBS was the bookrunner for the Regulation S notes.

Also pricing a new issue on Friday was China Merchants Bank Co. Ltd. The Shenzhen-based commercial lender priced a $250 million issue of 3¾% notes due Oct. 21, 2014 at 99.681 to yield 3.8635%, or mid-swaps plus 300 bps, a market source said.

ANZ and Standard Chartered were the bookrunners for the deal.

Middle East in focus

In trading from the Middle East, Qatar and Abu Dhabi were 25 bps to 30 bps off the wides.

Dubai started the day 10 bps to 20 bps tighter.

Emaar Properties' 2016 sukuk issue of notes closed at 102 mid, about 5 points off the year's highs, after the company was upgraded to Ba3 by Moody's Investors Service.

And Saudi Basic, which reported a 54% rise in third-quarter profit, didn't see much trading for its 2015s but closed at 101 bid, 101.5 offered.

"There are worse places to find a defensive four-year bond," a trader said.

IPIC taps bookrunners

Also from the Middle East, Abu Dhabi-based oil investment entity IPIC mandated Goldman Sachs, Barclays Capital, JPMorgan, Mitsubishi UFJ Securities, Natixis and Societe Generale for a roadshow starting Wednesday, a market source said.

The roadshow begins in Frankfurt, Munich, Zurich and Geneva and travels to London, Paris, Los Angeles and Boston before concluding on Oct. 26 in New York.

"This is a good test of the market, as it is a big, well-rated name with existing bonds," a trader said. "IPIC's 2020s and 2021s opened a couple tighter before fading along with the rest of the market, to go out 7 to 10 bps wider."

Eletrobras, CNPC tap leads

In other deal-related news, Brazil-based utility Eletrobras mandated Credit Suisse and Santander for a 10-year issue of dollar notes, a market source said.

A roadshow will be held on Tuesday and Wednesday in Boston, New York, London and Los Angeles.

And China's CNPC Golden Autumn has mandated Bank of China, HSBC, Deutsche Bank and Industrial and Commercial Bank of China as bookrunners for an offering of renminbi-denominated notes.

A roadshow will start Tuesday.

The Regulation S notes are guaranteed by China National Petroleum Corp., an oil and gas supplier based in Beijing.

Cathay Pacific, Alrosa eyed

Hong Kong-based airline Cathay Pacific is planning a dollar-denominated offering of bonds, a market source said.

HSBC is the bookrunner for the deal, part of a $2 billion medium-term note program.

Peru-based mining company Volcan Compania Minera is considering an issue of 10-year dollar-denominated notes, a market source said.

And Russian diamond company Alrosa mandated Goldman Sachs, UBS and VTB Capital for a possible dollar-denominated issue of notes, a market source said.

The Regulation S deal will be marketed during a roadshow starting Thursday.

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