Korea Development prints tap; Treasuries climb post-FOMC minutes; liquidity remains 'dire'

By Christine Van Dusen

Atlanta, Aug. 22 - Yields on U.S. Treasuries continued to rise on Thursday, and volumes remained thin, following the Federal Open Market Committee's release of its meeting minutes.

Against this backdrop Korea Development Bank priced an add-on to its dollar notes due 2016.

"Yesterday evening's FOMC minutes stated the committee was comfortable with plans to taper later this year, although a change was not yet appropriate," a London-based analyst said. "U.S. Treasuries sold off on the release, reaching 2.89%. Smaller move this morning with yields touching 2.934%."

The Markit iTraxx SovX CEEME ex-EU index spread on Thursday opened 5 basis points wider at 260 bps over Treasuries while the Markit iTraxx Crossover index spread - seen Wednesday at 424 bps - moved out 6 bps on Thursday.

Some spreads from Central and emerging Europe, the Middle East and Asia managed to tighten a bit.

"But it's very quiet, overall," the analyst said.

What trading that did occur on Thursday was fairly balanced between buyers and sellers, a London-based trader said.

"It's all about supply and demand and technicals. There are in fact some good opportunities in moving out in the curves if you can go against the grain a little and are confident the 10-year can stay sub-3%," he said. "Flows are moderate but there is certainly some paper around in Dubai names."

Dubai's 2023s were trading at 89, about 30 bps wider on the month.

Emaar Properties' notes traded Thursday between 105 and 105½ after last week's level of 108. Jebel Ali Free Zone (Jafza) moved to 109 mid, and DPWorld's 2017s hovered in the high-107s and closed near 107.12 bid, 107.87 offered.

"DPWorld's 2017s move lower," a trader said toward the end of the European session. "They're now 15 bps wider on the week.

KDB prices notes

In its new deal, Korea Development Bank priced a $250 million add-on to its 4% notes due Sept. 9, 2016 at 106.527 to yield 1.78%, a market source said.

HSBC was the bookrunner for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general operations, including extending foreign currency loans and for the repayment of maturing debt and other obligations.

The original issue of $750 million 4% notes due 2016 priced on March 9, 2011.

Perpetuals suffer

Liquidity remained "dire" on Thursday, ahead of the long weekend in the United Kingdom, the London trader said.

"Poor week all told," he said.

This was particularly true for perpetual notes from the Middle East, which moved as much as 40 bps wider.

The perpetual notes from Abu Dhabi Islamic Bank that priced at par were quoted at 98.62 bid, 99.62 offered after Wednesday's levels of 99.37 bid, 100.37 offered, he said.

Dubai Islamic Bank's perpetuals, which also priced at par, moved to 94¾ bid, 95½ offered after trading Wednesday at 95.37 bid, 96.37 offered.

Nigeria mostly trades down

In trading from Africa, Nigeria's recent $500 million 5 1/8% notes due 2018 traded Thursday at 101¼ bid, 102¾ offered after Tuesday's 101.62 bid, 102.62 offered.

The notes priced at 98.917 to yield 5 3/8%.

The second tranche of that same deal - $500 million 6¾% notes due 2023 that priced at 98.193 - was quoted Thursday at 101¼ bid, 102¾ offered.

On Tuesday the notes were spotted at 101.62 bid, 102.87 offered.

Morocco moves lower

Morocco 2022 notes, which priced at 100.263, moved to 85¾ bid, 87¾ offered on Thursday after Tuesday's levels of 86¼ bid, 87¾ offered, a trader said.

The sovereign's 5½% 2042 notes, which priced at 97.464, traded Thursday at 79½ bid, 81½ offered. On Tuesday they were seen at 80½ bid, 82½ offered.

Barclays, BNP Paribas, Citigroup and Natixis were the bookrunners for the Rule 144A and Regulation S deal.

Ukraine bids 'shaky'

For bonds from Ukraine, bids have been shaky this week, said Svitlana Rusakova of Dragon Capital.

"The action was not uniform, as some issues held on quite well," she said, pointing to the sovereign's 2022s and 2023, which moved down just a ¼ point.

"Quasi-sovereigns also adjusted lower," she said.

Icecek in focus

One trader was keeping an eye on Turkey's Coca-Cola Icecek AS, which reported second-quarter earnings results that matched estimates.

"The results offered few surprises, with the Turkish division affected by the recent unrest and poor weather," she said. "The international division continues to see strong volume expansion, with prices affected by South Iraq."

The company recently mandated Barclays, Citigroup, HSBC and JPMorgan for an issue of international bonds.

"Net leverage has increased marginally over the year to 1.8 times, and with a significant portion of debt maturing in 2014, it is unsurprising that they are considering a debut eurobond," she said.

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