Emerging market debt bounces higher on equities; Brazil reopens 2022 bonds to add R$750 million

By Reshmi Basu and Paul A. Harris

New York, Dec. 4 - Emerging market debt rallied Monday on firmer U.S. equities while Venezuela advanced on news that president Hugo Chavez won re-election without any political disturbances.

Nonetheless, market sources described the session as quiet amid low trading volumes ahead of Friday's release of non-farm payroll numbers in the United States.

At session's close, the JP Morgan EMBI Global index was up 0.20% while spreads tightened by three basis points.

In the primary market, the Federative Republic of Brazil (Ba2/BB/BB) reopened its 12½% local-currency denominated global bonds due 2022 to add R$750 million.

The retap priced at 105 7/8 to yield 11.663%.

Morgan Stanley and Goldman, Sachs & Co. were joint bookrunners for the issue, which was registered with the Securities and Exchange Commission.

Banco Itau Europa SA was co-manager.

This additional bonds bring the total size of the deal to R$3 billion.

There was more news on the primary front as more corporates plan to hit the road this week.

Out of Mexico, cement company Cemex SAB de CV plans to start a roadshow for a benchmark-sized two-part offering of dollar-denominated perpetual callable bonds (/BBB-/BBB) this week.

The roadshow is scheduled to run from Tuesday through Friday, making stops in Los Angeles, New York, Boston and London.

The deal will also be structured as fixed-to-floating rate securities. One tranche will be callable on Dec. 31, 2011 while the other tranche will be callable on Dec. 31, 2016.

There is a step-up for both tranches. The coupon will remain fixed until the call date, then the coupon will change to floating rate and step up to three-month Libor plus the sum of the Libor equivalent spread at the time of pricing plus 300 basis points.

Barclays Capital and JP Morgan are managing the Rule 144A/Regulation S transaction.

Transener, Slavinvest plan deals

Moving to Argentina, Buenos Aires-based electric company Transener plans to start a roadshow on Thursday for a $220 million offering of amortizing notes due 2016 (B//B).

Meanwhile the notes will carry an average life of 8½ years. Additionally, the deal will be non-callable for five-years.

Proceeds will be used for the company's current cash tender offer.

Deutsche Bank is the bookrunner for the Rule 144A/Regulation S deal. Citigroup is a lead manager.

Next Slavinvestbank LLC (Russia) (B1//B-) started a roadshow for a dollar-denominated issue of three-year bonds in Hong Kong on Monday.

The roadshow will run from Tuesday through Friday, stopping in Singapore, London, Switzerland, and Germany.

ABN Amro is the bookrunner for the Regulation S transaction.

Kazakhstan's Bank TuranAlem directly owns 15% of Slavinvest. TuranAlem announced its plans to acquire 51% control of Slavinvestbank by the end of 2007.

Finally, Bangkok-based wireless telecommunications company True Move Co. Ltd. set initial price guidance for its two-part offering of senior notes.

Guidance for the tranche of seven-year fixed rate notes was set at 11% area. Meanwhile talk for the tranche of five-year floating rate notes, which will be non-callable in two years, was set in the range of mid- to high 500 basis points over Libor.

Proceeds will be used to repay senior secured domestic bonds.

Citigroup and Deutsche Bank are lead managers for the Rule 144A/Regulation S transaction.

EM positive on firm equities

Emerging market debt moved up Monday as Venezuela rallied on the back of a problem-free and peaceful reelection win by president Hugo Chavez.

On a relief rally, the country emerged as the day's best performer, remarked a trader.

By session's end, the country had seen its spreads tighten by 13 basis points versus U.S. Treasuries.

In trading, the Venezuelan bond due 2027 gained 1.15 to 125.10 bid, 125.65 offered.

In other moves, high beta credits such as Brazil and Mexico also saw better bids.

Spreads for Brazil came in by five basis points. Mexico's credit also gained momentum as local markets rallied on optimism over the new administration of president Felipe Calderon.

At the end of the session, spreads for the country were narrower by four basis points versus Treasuries. In trading, the Mexico bond due 2026 gained 0.85 to 162.25 bid, 163.35 offered.

Ecuador down further

Meanwhile Ecuador bucked the overall positive trend as it scored another negative session on uncertainty surrounding president elect Rafael Correa's Wall Street-unfriendly rhetoric regarding debt restructuring.

During the session, the Ecuadorian bond due 2015 lost 2 points to 94 bid, 95 offered while the bond due 2030 shed 0.85 to 88 bid, 88.65 offered.

Overall, spreads remain well-supported, noted market sources. One analyst noted that flows into the market continue to help the asset class.

Emerging markets saw a whopping $522 million of inflows for the last week, the ninth consecutive week of positive flows, reported EmergingPortfolio.com Fund Research.

And the technicals picture is also giving a boost, the analyst added.

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