Emerging markets wider following lead of Treasuries; Country Garden, Romania, Islamic Development plan deals

By Jason Park

New York, Sept. 1 - Emerging market spreads continued to widen Tuesday, but amid tepid trading.

Meanwhile three new deals emerged, one that could price as soon as this week, the other two likely further off.

Emerging markets trading activity was at a very low level, sources said.

Spreads, as measured by the EMBI Plus index, widened out about 3 basis points, a change entirely reflective of movement in the 10-year Treasury note.

"Today's market action is reflective of the underlying treasury market," said one source in New York.

The yield on the 10-year Treasury slid 10 basis points to 3.367%.

Another source said trading continues to be at a very low volume ahead of the three-day Labor Day weekend in the United States.

"Volume is extremely light," he said. "After 2 o'clock, the screens were dark."

Three deals

However there was news in the primary market.

Country Garden Holdings Ltd. set price talk of 11¾% to 12% for a planned offering of five-year senior unsecured notes (Ba3/BB-/), according to an informed source.

The deal size remains to be determined.

JPMorgan is the bookrunner for the Rule 144A and Regulation S offering.

The offering is expected to price later this week.

The Hong Kong-based property developer will use the proceeds to repay debt, to fund property projects and for general corporate purposes.

One source said he expected the notes to price beyond the high end of talk.

"Since this is an Asian issue and given where the market is at the moment, the price will probably top the upper end of the range," he said.

Similar Chinese names such as Road King Infrastructure Ltd.'s 7.625% notes due 2014 are yielding 11.36% bid, 10.76% offered, while Lai Fung Holdings Ltd.'s 9.125% notes due 2014 are yielding 11.71% bid, 10.96% offered.

Romania plans sovereign

Also in primary news Tuesday, Romania is planning to issue a new five year note, arranged by Credit Suisse, UBS and Deutsche Bank, according to a source.

He said the talks are in the early stage so the amount has not been determined yet.

Islamic Development preparing deal

Similarly, sources said the market is readying for a new bond issue by the Islamic Development Bank.

The bonds will be arranged by BNP, Deutsche Bank and HSBC.

The amount and tenor have not been set yet.

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