Better tone for EM trading; spreads flat or wider; buyers for Russian, Turkish corporates

By Christine Van Dusen

Atlanta, July 1 - Trading of emerging markets assets was somewhat busy on Monday, marking the start of the new month with slightly wider spreads and mixed performance for bonds from the Middle East.

"Moderately active day but nowhere near as busy as last week of June," a London-based trader said.

The Markit iTraxx SovX CEEME ex-EU index on Monday widened 3 basis points to Treasuries plus 233 bps, while the Markit iTraxx Crossover index spread was unchanged at 467 bps on Monday.

"Markets are monitoring news from the three main regions as a guide to potentially less correlated asset price movements," according to a report from Barclays. "In the US, Fed commentary is overshadowing economic data for now. In Asia, markets are focused on the potential downside risks to growth in China."

Even though Hong Kong was out on a holiday on Monday, the overall tone for EM was better, a London-based analyst said.

"Turkey is opening largely unchanged with both credit default swaps and cash flat, while in Central and emerging Europe, despite their accession to the European Union, Croatia is also unmoved," she said.

She noted some buying of corporates such as Russian oil and gas company OAO Lukoil, Russian mining company Nord Gold NV, Turkey's Turkiye Garanti Bankasi AS (GarantiBank) and Turkey's Turkiye Is Bankasi AS (Isbank).

"In the Middle East and North Africa, we are also seeing a slightly better tone," she said.

Ooredoo gets noticed

Investors on Monday showed interest in Qatar's Ooredoo QSC, formerly known as Qtel International, after last week's news that the company won a license to operate in Myanmar.

Ooredoo's 2025 euro bond was trading Monday between 102 and 103, about 12 bps tighter, a trader said.

"Fairly solid start to July with the early morning Treasury weakness the only trigger for some selling," a London-based trader said.

Perpetuals better bid

Dubai-based DPWorld's 2037s were trading Monday afternoon at 105, following the low of 99 touched in late June, a trader said.

And perpetuals caught a bid on Monday, with some activity reported for Emirates NBD's 5¾% issue.

"It's tricky replacing some as liquidity remains tested," he said. "Emirates airline paper is around. The 2025s traded above 92 at the back end of last week, closing at 90¼ bid, 91¼ offered today."

Buyers were sighted for names like Majid al-Futtaim Holdings and Dubai Electricity and Water Authority (DEWA).

"DEWA's 2015s are considerably wider on the month and seeing demand," he said. "Some front-end paper has definitely come out over the past fortnight, but the local buyers were back today to take up recent slack."

Middle East in focus

Saudi Electricity Co. (SECO)'s 2022s were quoted at 100.62 bid, 101.37 offered after Friday's 100¾ bid, 101¾ offered. The company's 2043s traded at 90 bid, 91 offered on Monday. On Friday, they notes were spotted at 91 bid, 93 offered.

Abu Dhabi-based Dolphin Energy's 2019s were seen Monday at 109 bid, 110 offered, unchanged from Friday. The company's 2021s were seen Monday at 107.87 bid, 108.87 offered. On Friday, they traded at 108 bid, 109 offered.

International Petroleum Investment Co. (IPIC)'s 2022s on Monday traded at 107.87 bid, 108.87 offered after the previous session's 107¼ bid, 108¼ offered.

TAQA, DEWA notes dip

Abu Dhabi National Energy Co.'s (TAQA) 2021s were seen Monday at 110½ bid, 111½ offered. On Friday the notes traded at 111 bid, 112 offered.

From Dubai's corporate space, DEWA's 2015 notes were quoted at 109.50 bid, 110.50 offered after trading at 109.56 bid, 110.56 offered on Thursday.

The Dubai sovereign's 2020s moved to 115.62 bid, 116.62 offered on Monday after Thursday's 115½ bid, 116½ offered.

Lat-Am sovereigns tighten

Bonds from Latin America traded higher and a bit tighter but with light volumes on Monday, a New York-based trader said.

Venezuela's 2027 bond moved up to 85, while Argentina's 2015s were spotted at 873/4.

"Account activity seemed balanced," he said. "The rally in US treasury and most equity markets along with lower overall volatility helped prices continue the positive momentum of the last few days."

Meanwhile, real-money accounts showed up on the buy side for Latin America's corporate names, another New York-based trader said.

"But they continue to sell off the runs and buy the more liquid spread credits," he said.

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