Emirates considers notes; Tamweel on deck; light volumes, mixed performance for EM assets

By Christine Van Dusen

Atlanta, Sept. 29 - United Arab Emirates-based Emirates and Abu Dhabi-based Tamweel PJSC took steps toward the bond market on a mixed Thursday with light volumes for emerging markets assets.

Though most of emerging Europe, Middle East and Asia were fairly resilient at the open, spreads widened, with the Markit iTraxx SovX index spread 10 basis points wider. That marked a few bonds about 1/4-point to 1/2-point lower.

"But overall the EM world seems happy to sit this one out," a trader said. "It's all the same stuff. You can trade all the sovereigns and blue chip corporates. But clients still seem more focused on offloading off-the-run corporate risk and subordinated debt, where liquidity is much harder to find."

The morning's winner, he said, was KazMunaiGaz, which has so far snapped back 50 bps during the week versus Gazprom and remains very well bid.

"It's certainly better than the beleaguered BTA Bank, which made new lows at 47 yesterday," he said.

Other early trades showed Ukraine's 2021s, Serbia's 2021s and VTB Bank's 2020s all trading at 92.

"Benchmark EM assets have spent the day tracking the oscillations in global equity markets," a trader said. "The bigger discussion of the day was focused on who fills the gap likely to be left as European banks become much less active in the EM loan space."

IG sukuks sought after

In other trading on Thursday morning, investment-grade sukuks were highly sought after, another trader said.

Sharjah Islamic Bank was a particular standout, with its 2016 notes about 25 bps tighter on the month at 1051/2.

"Do not get in the way of this bond," he said.

Lebanon also continued to do well on Thursday.

"The selling pressure of last week is a distant memory," he said.

Said another trader: "Special mention on Lebanon, which moved higher now that the international selling is out of the way. We've traded the 2014s, 2020s, 2021s, 2022s and 2016s so far this week. Famous last words, but spreads are looking fair-ish on Lebanon, but it's all about the technicals there."

Middle East in focus

By day's end, Qatar National Bank was trading just above par.

"Longer-dated Qatar assets have come out as some larger accounts book some profits," a trader said.

And Kuwait's Kipco saw some demand.

"We also saw supply on Abu Dhabi National Energy Co.," he said.

Bahrain Bank was 40 bps wider on the week while Bahrain's 2020s held on ahead of supply.

"It was mostly quiet for Dubai names," a trader said. "Dubai Water and Electricity Authority's 2016s are still rich, so investors should move into the 2015s or 2020s."

And International Petroleum Investment Co. continued to feel a bit heavy.

"Dolphin is getting to interesting levels too," he said.

Ukraine corporates lag

Also during the European morning, some new risk aversion was sighted for Ukraine.

"Ukraine corporates are hiding out in Odessa, but there are some prices in the sovereign bonds," he said. "A small delay in a local government bond payment has triggered a new round of risk aversion in Ukraine."

By afternoon, the sovereign was bouncing 1 point off the morning lows. "Corporates are still lagging, but there is two-way interest at last in Mriya Agro and Oschadbank," he said. "The Ukraine sovereign recovered as the day went on and it became clear that the late payment on the local bond redemption was just a technical issue."

Oschadbank's 2016s were trading at 80 bid, 81.5 offered. But by the end of the day, the company's bonds had hit new lows.

Russia quiet, Turkey mixed

In other trading news during the morning session, Russia's banks were quiet, with just a few small trades going through, a trader said.

"It's the unfortunate reality that this sector is another that basically goes into hiding when the market becomes troubled," he said.

By the European afternoon, the Russia quasi-sovereign space had rallied.

Looking to Turkey, performance was mixed on Thursday morning, he said.

"It's an amazingly diverse sector," he said. "Top-tier banks perform in line with the sovereign on the back of local demand while the rest is just being ignored and gets marked down in line with other high-yield names."

Emirates, Tamweel eye deals

In deal-related news, the United Arab Emirates-based Emirates airline is considering a $1 billion issue of bonds, a market source said.

Proceeds from the issue would be used to fund jets.

In June the Dubai company priced $1 billion of 5 1/8% notes due 2016 at 99.904 to yield 5.147% via Deutsche Bank, Emirates NBD, HSBC in a Regulation S-only transaction.

And Abu Dhabi-based real estate developer Tamweel will set out on a roadshow on Monday for a dollar-denominated offering of sukuk notes, a market source said.

Issuance is expected to occur during the fourth quarter.

"Mandates in EM debt are so far limited to the Middle East and North Africa," a trader said.

Said another trader: "It will be interesting to see how these bonds perform and are priced."

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