Emerging markets quiet; Argentina volatile; Mexico upsizes; VEB, Southern Copper on tap

By Christine Van Dusen

Atlanta, April 6 - Activity was muted in emerging markets on Tuesday as many in the investing world remained on Easter break and risk aversion picked up in light of Greece's continued difficulty in resolving its debt situation, market sources said.

"There's not a lot going on. It's still Easter week. Everyone's off," a London-based trader said. "It's just a skeleton start everywhere. Volumes are lower."

Spreads are "tighter in cash and CDS, with cash outperforming CDS," he said.

Overall the tone "remains good," said Enrique Alvarez, debt strategist with think tank IDEAglobal. "Most of the theme is related to a very small spike in risk aversion. The markets have run up a lot over the last couple of days in risk compression terms. I think that most of the focus is still on U.S. Treasury yields and the penetration of that could potentially occur above 4%."

Tuesday didn't see much in the way of price changes, he said. "Argentina remains the most volatile of the Latin American components."

The sovereign plans to swap up to $20 billion in debt on April 14. "People are taking larger bets on the actual launch of the holdout swap, and that is keeping Argentina very well bid and starting to draw a lot of attention," he said.

Greece eyed again

Debt-saddled Greece also remained in the news on Tuesday as the sovereign faced skepticism that it will get through its crisis and that a bailout from the International Monetary Fund and European nations will come together.

"We're going to pay attention to what's going on in Greece," Alvarez said. "As long as the contagion effect is not too severe, the market looks very well bid."

He pointed to Mexico's Tuesday upsizing of a reopening of its 6.05% bonds due 2050 to $1 billion. "That was a nice upsize, given that they initially indicated they would do $500 million," he said.

Tuesday also saw Russia's Vnesheconombank (VEB) planning an issue of one-year dollar-denominated bonds via Renaissance Capital and Raiffeisenbank, the London trader said. The deal is being talked at a coupon of 100 basis points over six-month Libor.

The trader, for one, wasn't particularly impressed with the deal. "It's really boring," he said.

Also on Tuesday, Southern Copper Corp. - which is based in Phoenix but has operations in Peru, Chile and Mexico - announced a two-tranche offering of senior unsecured notes due 2020 and 2040 with Credit Suisse, Goldman Sachs and Morgan Stanley.

Other than that, the day was slow, the London trader said. But activity should pick up next week, he said. "There should be more stuff when everyone's back in."

Up next, according to market sources: Itau Unibanco's planned 10-year tier 2 notes via Goldman Sachs, Itau and Morgan Stanley; MOL Hungarian Oil and Gas' euro-denominated, benchmark-sized notes from BNP Paribas, Deutsche Bank, RBS and Unicredit; and Dubai Electricity and Water Authority's planned dollar-denominated issue of notes or sukuk offering.

Mexico upsizes reopening

Mexico upsized a reopening of its 6.05% bonds due 2050 to $1 billion from $500 million, a market source said.

Goldman Sachs and Credit Suisse are the bookrunners for the deal, which is being talked at Treasuries plus 137.5 bps.

VEB plans bonds

Russia's Vnesheconombank plans to issue one-year dollar-denominated bonds, according to a market source.

Renaissance Capital and Raiffeisenbank are the bookrunners for the issue, which could total about $2 billion.

The deal is being talked at six-month Libor plus 100 bps, the source said.

Vnesheconombank is the Moscow-based Bank for Development and Foreign Affairs.

Southern Copper plans bonds

Southern Copper announced a sale of senior unsecured notes (Baa2/BBB-/BBB) in two tranches on Tuesday, a market source said.

The deal is in tranches with maturities in 2020 and 2040 and features a change-of-control put of 101%.

The offering is expected to price following a roadshow running from Thursday to Monday.

Bookrunners are Credit Suisse Securities, Goldman Sachs & Co. and Morgan Stanley & Co.

Proceeds will be used for general corporate purposes, including financing capital expenditures.

Andrea Heisinger contributed to this report

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