Emerging market bonds finish flat at U.S. close; Metallurgical Corp. of China starts roadshow

By Paul A. Harris

Portland, Ore., July 12 - Emerging markets bond prices stabilized during the Tuesday session in the United States following intense volatility in Europe as the European Union attempts to shore up the debt of its distressed member states, sources said.

The EMBI Global index closed at a spread of 314 basis points to Treasuries, 1 bp wider from the European close.

Brazil's benchmark dollar-denominated bonds due 2040 were unchanged on the day, according to a buyside source from the U.S. West Coast.

The primary market remained mostly quiet.

Metallurgical Corp. of China began a roadshow for up to $500 million of five-year senior notes.

Korea South-East Power Ltd. (Kosep) offered upwardly revised price talk on its proposed $300 million maximum offering of 5.5-year senior notes.

Volatility continues in Europe

Market volatility was extreme at the European close, according to a London-based debt capital markets banker.

With players continuing to focus on the Italian sovereign debt crisis, as they had done on Monday, the Itraxx Crossover index widened more than 30 bps on Tuesday to 486 bps during the European session.

At the close, the index had retraced all the way back to 453 bps, 3 bps wider on the day, the banker said.

"There were rumors that the ECB was buying bonds," the source explained.

"Also there were auctions of Italian and Greek six-month bills, which were said to have had good bids-to-cover.

"There were also rumors of Chinese buying of the Greek paper.

"I don't think any of those things move the needle that much. It's just that when you see a move that strong, it doesn't take much to bring it back."

Well after the European close, Moody's Investors Service came with some salt for Europe's wounds. It downgraded the foreign- and local-currency government bond ratings of Ireland to speculative grade Ba1 from Baa3.

Metallurgical Corp. hits road

MCC Holding (Hong Kong) Corp. Ltd. began a roadshow on Wednesday for an offering of up to $500 million of five-year senior notes (Baa2/BBB-/), according to a market source.

Morgan Stanley, HSBC, Barclays Capital and Goldman Sachs are the underwriters.

Proceeds will be used for working capital, to refinance short-term loans, for capital expenditures and for general corporate purposes in the company's overseas operations.

The issuer is a subsidiary of Beijing-based Metallurgical Corp. of China, an engineering contracting, resource development, equipment manufacturing and property development company.

Kosep ups talk

Korea South-East Power raised price talk for its proposed $300 million maximum offering of 5.5-year senior notes (A1/A) to Treasuries plus 230 bps from earlier spread talk of 215 bps.

The final terms of the deal, which had initially been expected on Monday, were anticipated by the end of the Tuesday session, the source said. However, no terms were available at press time.

Citigroup, Goldman Sachs and Morgan Stanley are the bookrunners for the Regulation S offer.

The prospective issuer is a unit of Korea Electric Power Corp. (Kepco).

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