EM spreads widen only slightly on ECB remarks; volumes decline; Brazilian paper 'scarce'

By Christine Van Dusen

Atlanta, Aug. 2 - Though the larger markets suffered Thursday after European Central Bank president Mario Draghi said the ECB would only buy bonds after governments had activated their bailout funds, emerging markets assets didn't react strongly and spreads barely widened.

"It's been very quiet today, and slow," a New York-based trader said. "Street volumes are down from the beginning of the week, where we saw a lot of month-end extra cash put to work feverishly. Customer inquiries have also slowed considerably."

Even some negative economic data from the United States - showing that jobless claims increased last week - did little to impact emerging markets assets.

Latin American corporate bonds, for one, were mostly unchanged on a spread basis, the trader said.

"They're possibly a few basis points wider to account for the drop in Treasury yields, which keeps assets in the same ballpark on a price basis," he said. "Interdealer auction participation continues to be the lightest seen in quite a while, and dealer inventories continue to be light as well."

Notes from Brazil's OGX Petroleo e Gas Participacoes SA settled in at about 88 for the 2018s and 83½ for the 2022s.

"Urbi [Desarrollos Urbanos SAB de CV] paper continues to take it on the chin as sellers emerged yesterday in droves, sending the 2022s into a 98 handle range, all the way from north of 105 on Thursday, pre-earnings," a trader said. "Scarcity in Brazil high-grade paper is evident in daily Street volumes."

Indeed, very little volume was seen for names like Gerdau, Votorantim, Braskem, Companhia Siderurgica Nacional and Construtora Norberto Odebrecht SA.

The primary market was similarly quiet on Thursday, with market sources whispering about possible dollar bonds this month from India's Icici Bank and Rural Electrification Corp.

DPWorld inches up

In trading on Thursday, Dubai's DPWorld saw its 2017 notes close at 109 bid, 109.50 offered after Wednesday's 109 bid, 109.75 offered.

The company's 2037 notes, seen Wednesday at 105 bid, 106 offered, were trading Thursday at 104.75 bid, 106.25 offered. On Tuesday the notes were quoted at 104.75 bid, 105.75 offered.

And the 2017 notes from Saudi Electricity Co. that traded Wednesday at 102.25 bid, 102.75 offered were seen on Thursday morning at 102.25 bid, 103 offered.

The company's 2022 notes were quoted Thursday at 108.62 bid, 109.37 offered after Wednesday's levels of 108.50 bid, 109 offered.

Qatar 2018 notes widen

The recent $2 billion 2.099% notes due 2018 from Qatar funding vehicle SoQ Sukuk that priced at par were heavy in trading on Thursday, a trader said.

The notes were 3 bps wider at 100.25 bid, 100.40 offered.

The second tranche of that deal - $2 billion 3.241% notes due 2023 that also priced at par - traded Thursday at 102.50 bid, 102.75 offered after being quoted Wednesday at 102.50 bid, 102.85 offered.

Barwa Bank, Deutsche Bank, HSBC, QInvest and Standard Chartered Bank were the bookrunners for the Regulation S deal.

Investec, Poland in focus

In other trading, the Johannesburg-based financial company Investec's recent $300 million 3 7/8% notes due 2017 that priced at 99.775 closed Thursday at 97 bid, 99 offered.

HSBC, ING, Investec, RBS and Standard Chartered Bank were the bookrunners for the Regulation S deal.

On Wednesday the notes were seen at 97 bid, 98.50 offered.

Bonds from Central Europe continued to trade on lower volumes, with some attention paid to notes from Poland, a market source said.

Indian lender sees demand

The recent issue of notes from Mumbai-based State Bank of India attracted $6.8 billion in orders, a market source said.

The $1.25 billion issue of 4 1/8% five-year senior unsecured notes priced at 99.14 to yield 4.318%, or at Treasuries plus 375 bps.

Citigroup, Barclays, Bank of America, Deutsche Bank, UBS and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.