Emerging market debt follows U.S. Treasuries lower in light volume

By Reshmi Basu and Paul A. Harris

New York, March 1 - Emerging market debt drifted lower, closely tracking an immobile U.S. Treasuries market Tuesday.

The market traded in very narrow ranges in a quiet session, said a trader.

"Trading wasn't terribly exciting today [Tuesday]," he said.

"Volumes were light. Treasuries did nothing. They were in the same range the whole day."

U.S. Treasuries were range bound Tuesday as the yield on the 10-year note stood at 4.37% only marginally down from 4.38% on Monday.

And with little direction from the Treasuries market, emerging market debt showed little movement Tuesday. The Brazil bond due 2040 fell 0.188 to 115 3/8 bid. The Ecuador bond due 2030 fell half a point to 93¼ bid. The Russia bond due 2030 was down 1/8 of a point to 105 bid.

Brazil's new issue also traded lower - a market source had spotted a bid price of 97.994.

On Monday, Brazil priced $1 billion 10-year global bonds (B1/BB-) at 98.829 to yield 7.90%.

In the secondary, a buyside source described the deal as weaker, but supported.

Eyeing job numbers

In recent sessions, the debt market has been stalking the U.S. Treasuries market and is expected to do so over the next few days, according to sources. Investors will unlikely want to add risk to their holdings ahead of Friday's non-farm payroll numbers.

"People are a little more cautious," said a buyside source. "I don't think anyone is going to change their position. It's going to be driven by prices."

The U.S. Treasuries market has fixated emerging markets in the past few sessions. And some fear that the market may mount a correction as it prices in more aggressive future action by the Federal Reserve.

The job numbers may provide a clue as to what direction the Fed will take. But then again, not too much can be pinned onto one set of economic data.

"You can't sit around because there's a job report every month, so I don't think that people are any more scared than any other job number," said the buyside source.

"It's an important number for the market. But does that mean that it's going to take us to 5% on the 10-year? I don't think so."

"It's really got to be the accumulation of data and the Fed," he said.

Adding to the Asian pipeline

Issuers from Asia finally came knocking as three corporates joined the roadshow schedule.

Malaysia's Titan Petrochemicals Group Ltd. will begin a roadshow Wednesday in Hong Kong for its $400 million offering of seven-year senior unsecured notes. Morgan Stanley has the books for the Rule 144A/Regulation S offering.

Malaysian plantation operator IOI Corp. Bhd. will begin marketing a $350 million offering of 10-year global bonds to investors on Thursday in Singapore. Barclays Capital and Citigroup will run the books for the Regulation S-only offering.

Singapore-based commodities trading firm Noble Group Ltd. will commence a two-team roadshow on Thursday in Singapore and the United States for its $500 million offering of 10-year non-call-five senior notes. JP Morgan has the books for the Rule 144A/Regulation S offering.

Also adding to the pipeline, Latvia's Parex Banka plans to make its debut on the eurobond market with an offering of up to €200 million.

And another market source said that TNK-BP, Russia's third largest oil company, and fixed-line operator MGTS will bring eurobond deals.

Size, timing and syndicate are to be determined.

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