Risky assets get boost from break in Middle East tensions; Akbank, Banco BMG price notes

By Christine Van Dusen

Atlanta, March 3 - Risk appetite returned on Thursday - with fresh buying and new deals from Turkey's Akbank TAS and Brazil's Banco BMG SA - as concerns about the Middle East began to recede and emerging markets investors were heartened by better U.S. economic data.

"The Middle East hasn't gone away, but it's quieted down," said a Connecticut-based trader. "People are using the break in tensions to add some risk."

The JPMorgan Emerging Markets Bond Index spread tightened by 13 basis points to Treasuries plus 252 bps, with Venezuela a standout at 39 bps tighter.

"It's good. Spreads are better, and recent new issues are doing very, very well," a New York-based market source said. "There are certain pockets where things aren't great, but there is money on the sidelines and people have it to spend. We've been seeing clients putting money to work. Any kind of fear factor is now on the sidelines."

Akbank, Banco BMG do deals

Turkey-based financing company Akbank's $500 million 6½% notes due March 9, 2018 came to market Thursday at 99.656 to yield 6.562%, or Treasuries plus 360 bps, a market source said.

The notes priced slightly wider than talk, which was set at Treasuries plus 350 bps.

Citigroup, Credit Agricole, HSBC and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes.

And Brazil-based lender Banco BMG sold $300 million 6½% notes due March 14, 2014 at 99.331 to yield 6¾%, a market source said.

The notes came in line with talk, set at the high 6% area.

Barclays Capital, BCP Securities and Banco Bradesco were the bookrunners for the Regulation S-only notes.

Oschadbank prints notes

The deals followed the Wednesday pricing of Ukraine-based lender OJSC Oschadbank's $500 million notes due March 10, 2016 at par to yield 8¼%, a market source said.

Credit Suisse and Morgan Stanley were the bookrunners for the Regulation S deal.

And pricing is imminent for Mexico-based lender BBVA Bancomer SA's $2 billion two-tranche issue of notes due 2016 and 2021 via bookrunners BBVA, Deutsche Bank and Goldman Sachs in a Rule 144A and Regulation S deal.

The $750 million notes due 2016 were launched to yield Treasuries plus 237.5 bps.

The $1.25 billion notes due 2021 were launched at a spread of 312.5 bps over Treasuries.

Middle East credits active

In trading on Thursday, Bahrain's 2020 notes were seen at 92.25 bid, 93.25 offered after trading on Wednesday at 92 bid, 93 offered.

Qatar's Qtel International Finance Ltd.'s 2025 notes - which were seen Wednesday at 87.25 bid, 87.75 offered - were trading Thursday at 87.37 bid, 88.12 offered.

Most bonds in Abu Dhabi opened Thursday between 5 and 10 bps tighter, a London-based trader said. And Dubai, Dubai Water and Electricity Authority and Emaar Properties all had a "solid start."

Meanwhile, Commercial Bank of Qatar's 2014 bonds - which were seen trading a week ago at about 102.25 bid, 102.50 offered - were up on Wednesday at about 102.75 and opened Thursday at 102.60 bid, 103 offered.

Fibria performs well

The Connecticut-based trader said he was particularly interested in the $450 million 6¾% notes due 2021 from Brazil's Fibria Celulose SA that came to market on Tuesday at 99.107 to yield 6 7/8%.

"That has performed very well," he said. "It came cheap to the existing 2020 bond."

The notes were seen trading at 102¼ on Thursday.

"There's been a nice cross-section of investors from the U.S., Europe, pension funds, hedge funds and some retail accounts," he said. "So that deal has done very, very well."

The New York-based source noted the same thing. "That's done very well," he said. "Investors seem to be allocating more to this sort of stuff."

South Africa bond attractive

Another recent deal that's been getting some attention is the $750 million 6¼% notes due 2014 that South Africa sold on Tuesday at 99.437 to yield 6.292%.

"Yesterday we were very active in this in the morning," the Connecticut trader said. "That one also did very well, which is contrary to what you would've thought. We've seen a lot of selling of long-duration paper, but this was able to perform very well anyway.

"People like that credit. It offers good value and trades at levels of a BBB even though it's an A. And the deal came cheap enough where it garnered sufficient and broad-based interest from both Europe and the United States."

At mid-day on Thursday the notes were trading close to 101.

"What's compelling is we've seen some real dedicated money adding in that one," he said. "It's also attractive because it's a low-beta credit. It's pretty consistent and doesn't come off too much in times of weakness."

Lithuania comes cheap

The Connecticut trader was also tracking the $750 million 6 1/8% notes due 2021 from the Republic of Lithuania, which priced Wednesday at 98.172 to yield 6 3/8%.

"That has done very well," he said. "I just traded some at 993/4. It came cheap to the curve and saw a broad cross-section of buyers too, and it was attractive to a number of portfolio managers. It's a nice one from a diversification standpoint. There's not much out there from them, and it's a nice dollar bond."

In general, recent issues have done well if they've priced right, he said.

"If deals are priced cheap to the existing curves, they've gotten good support," he said.

Market sources were also talking Thursday about a potential five-year issue of notes from India's Canara Bank, which set out on a non-deal roadshow starting Feb. 21 with Bank of America Merrill Lynch, Citigroup, Deutsche Bank, HSBC and RBS.

"Things are going to get moving in the primary market soon," the New York-based market source said. "The market's actually rallied a lot, with spreads in about 20 bps in investment-grade EM. If we have this stability and the boring sideways markets and equities sort of up there, things will start getting going in the primary."

Sunac China on roadshow

In other news on Thursday, Hong Kong-based residential and commercial property developer Sunac China Holdings Ltd. announced plans to embark on a roadshow starting on or around March 7 for an issue of senior notes.

Deutsche Bank, Goldman Sachs and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to finance new land bank acquisitions and for general corporate purposes.

The deal is being marketed at a challenging time for the Chinese real estate industry.

"The Chinese property sector is still kind of dicey, and it's just struggling to get out of its own way," the New York-based market source said.

"Any time it gets its legs and gets supply you've got them hiking rates, so it's a touch-and-go situation."

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