Poland sells notes; upcoming holiday, violence in Gaza thin trading; Cosco roadshow ahead

By Christine Van Dusen

Atlanta, Nov. 19 - Poland priced euro notes on an otherwise slow Monday for emerging markets assets as the Thanksgiving holiday approaches and investors' confidence is tested by the continued violence in Gaza.

The little market activity that did take place was mostly positive, given that some progress was reported on the fiscal-cliff discussions in the United States.

"Today buyers will prevail in the market due to a favorable external environment in global capital markets," according to a report from UFS Investment Co.

The Markit iTraxx SovX index spread started the day 8 basis points tighter while the corporate index narrowed by 9 bps.

"Markets are trading with a positive tone in European trading hours," according to a report from Barclays.

Still, the continued conflict on the Israeli border - as well as uncertainty about the talks in Greece - kept investor enthusiasm in check.

"The markets are, so far, trading sideways," a New York-based trader said. "Clients still have a slight bias to the sell side, but not nearly as heavy as the early part of last week."

Few issuers on Monday announced upcoming deals, with just Russia-based OAO Rosneft pondering notes and China Cosco Holdings Co. Ltd. planning a roadshow for a dollar-denominated issue of bonds.

Market sources also were whispering about a possible deal from Mexico-based conglomerate Grupo Kuo SAB de CV.

"The pipeline is extremely light until we commence from Thanksgiving," the trader said. "No specific trades stand out so far from a Street or customer perspective."

Poland prints notes

In its new deal, Poland priced a €750 million increase of its existing 3 3/8% notes due July 9, 2024 at 101.583 to yield 3.21%, or mid-swaps plus 135 bps, a market source said.

Commerzbank, HSBC, ING and Societe Generale were the bookrunners for the Regulation S deal.

The original issue of €1.75 billion notes priced in October at par to yield 3 3/8%, or mid-swaps plus 143 bps, in line with talk.

Turkey, Russia open higher

In trading on Monday, bonds from Turkey opened a 1/2-point higher while Russia's bonds were 3/8-point higher, following weaker industrial production numbers from the latter sovereign.

Following the news that Russian gas producer OAO Novatek was considering a $1 billion issue of notes, Russian oil company Rosneft was mulling its own deal, a London-based market source said.

"For Rosneft, this will be a debut issue, which in itself will generate substantial interest from investors, in our view," she said. "The increased supply of investment-grade paper from the sector provides greater choice for investment."

Alpek trades well

From Latin America, the recent $650 million issue of 4½% notes due 2022 that Mexico-based petrochemical company Alpek SAB de CV priced last week continued to trade well.

The notes, which came to the market at 99.713 to yield Treasuries plus 295 bps, are 16 bps tighter from issuance, a New York-based trader said.

Citigroup, Goldman Sachs, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

And Brazil-based credit and debt card company Cielo SA's $875 million notes due 2022 that priced at 99.32 to yield 3.8% were seen Monday at 97.85 bid, 98.65 offered.

BB Securities, Bradesco BBI and Goldman Sachs were the bookrunners for the Rule 144A and Regulation S deal.

Some activity for QGOG

Some trades were seen Monday for Brazil-based drilling company QGOG Constellation SA's $700 million issue of 6¼% notes due Nov. 9, 2019 that priced at 98.612 to yield 6½%.

The notes were quoted at 99.65 bid, 100.35 offered.

HSBC, Bank of America Merrill Lynch and Citigroup were the bookrunners for the Rule 144A and Regulation S deal.

But most other Latin American names were fairly quiet on Monday.

"Usual slow start to the week," a New York-based trader said. "But you have to factor in a general lack of activity in front of the upcoming holiday, and we also have a Mexican bank holiday today."

Liquidity drying up

In other trading, bonds from much of emerging Europe have remained mostly unchanged, according to a report from Erste Group Research.

"Local currency benchmark government bonds and sovereign eurobonds have shown little movement of late as liquidity has dried up significantly," the report said.

In trading from Ukraine, sovereign bonds have been moving wider, with the 2017s recently seen at 106.25 bid, 107 offered, said Svitlana Rusakova of Dragon Capital.

Corporate prices have been mostly unchanged, with Oschadbank seen at 94.25 bid, 95.25 offered and Metinvest's 2015s at 101 bid, 102 offered.

China Cosco plans roadshow

Also on Monday, shipping company China Cosco Holdings announced plans for a roadshow for a dollar-denominated issue of notes.

BOCI and HSBC are the bookrunners for the Regulation S notes.

The roadshow is expected to start on Tuesday or soon after.

The proceeds will be used to on-lend to the company's offshore subsidiaries and affiliates for general corporate purposes.

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