Turkey's GarantiBank new notes trade up; Dubai's DEWA outperforms; bond fund inflows rise

By Christine Van Dusen

Atlanta, Sept. 7 - Emerging markets investors on Friday remained optimistic about efforts to boost the global economy and snapped up new bonds from Turkey's Turkiye Garanti Bankasi (GarantiBank), Aruba and Chile's Banco de Credito e Inversiones SA (BCI).

"The rally following the ECB press conference has continued," according to a report from Barclays.

And from the United States, reports that the economy added fewer than expected jobs had market-watchers assuming the Federal Reserve will soon institute further quantitative easing.

In response, the pace picked up for trading of emerging markets assets.

"Active day, especially this morning," a London-based trader said.

Standouts included Garanti's new bonds and notes from Ukraine, Croatia, Romania, Bahrain and Dubai Water and Electricity Authority (DEWA).

The primary market quieted on Friday. Sources are now looking out for next week's deals from Zambia and, possibly, Mexico's Mexichem SAB de CV.

In other news, emerging markets bond funds saw $679.7 million in inflows for the week ended Sept. 5, according to a report from data-tracker EPFR Global. That is up from the previous week's total of $445 million.

"With the summer holidays largely behind and key European Central Bank and US Federal Reserve meetings ahead, investors spent the first five days of September chasing yield, re-positioning their fixed income allocations for a further round of quantitative easing in the US and responding to the latest export numbers from Asia," EPFR said in its report.

Hard-currency funds beat out local-currency funds by a 7-to-1 margin.

Year-to-date emerging markets bond funds have seen flows of more than $32 billion, EPFR said.

Garanti deal reprices sector

The new two-tranche issue of $1.35 billion notes due 2017 and 2022 from GarantiBank received a lot of attention on Friday.

"They performed very well from the word 'go,'" a London-based trader said.

The Regulation S deal - via Bank of America Merrill Lynch, Citigroup, Commerzbank and Morgan Stanley - included five-year 4% notes that priced at 99.218.

The 10-year 5¼% notes priced at 99.043.

"The world is a different place, with a new GarantiBank dual-tranche issue essentially repricing the whole sector," a London-based analyst said. "The bonds were well received with books oversubscribed."

The 2022s received the most demand, given their long-dated maturity.

"They are the longest-dated bonds in the sector, thus appealing to investors who are searching for duration," she said. "However, given the substantial pipeline of new issues in the sector, this exclusivity might not last for long."

Garanti's bonds trade up

On Friday, Garanti's new five-year notes opened at 100.25 bid, 100.75 offered before trading at 100.50 bid, 100.625 offered, a trader said.

The new 2022s were very active early in the day, settling in with a 101 handle.

In response to this deal, Isbank's 2016 notes started trading in line with Akbank's 2015s while Yapi Kredi's notes tightened. And Garanti's existing 2021 notes were 35 basis points tighter on the week, she said.

"Despite the slightly higher cash prices on these bonds, the credits have strong fundamentals and should trade at least in line with the Garanti curve," she said.

Another trader said, "Impressive day, week and month spread changes. The sovereign is a rock, with 152 bid, 156 offered for five-year credit default swaps."

Ukraine bonds strengthen

Looking to Ukraine, sovereign eurobonds continued to strengthen, according to Svetlana Rusakova of Dragon Capital.

"Rather than any significant trading volumes going through, it seemed more like demand versus lack of supply pushing the curve higher," she said.

The sovereign's 2017s moved up to 102.75 bid, 103.75 offered while the 2020s were seen at 96.25 bid, 97.25 offered. The 2021s were quoted at 96.5 bid, 97.5 offered.

On the corporate side, Naftogaz moved higher, trading at 99.75 bid, 100.75 offered. And Oschadbank inched up three-quarters of a point but "still remained attractive" at 89 bid, 90.5 offered, Rusakova said.

Croatia, Romania trade well

Croatia finished the week on solid footing following Fitch Rating's outlook upgrade from negative to stable, according to a report from Erste Group Research.

Romania's recent €750 million tap of its 6½% notes due June 18, 2018 - which came to the market at 106.817 to yield 5.1% - also fared well during the week.

"Hungary was the only outlier in the region, missing the rally because of the harsh comments of [the prime minister] on the IMF conditions, although he later softened his stance," Erste Group said, noting that Hungary will accept a different package.

And some of Russia's eurobonds saw brisk growth, UFS said in a report. The sovereign's 2028, 2042 and 2018 bonds improved. Russia's 2030s, however, underperformed late in the week.

"On Friday morning external background was neutral," the report said. "Russia's 2030 has been traded at 126, unchanged."

Russian corporates perform

In Russia's corporate arena, long-dated bonds from Vimpelcom and metallurgical companies have kept up their solid performance in trading, UFS said.

Vimpelcom's 2021 and 2018 bonds moved up 1%, while Severstal's 2016 bonds got a 0.75% bump.

Evraz Group's 2017s and Metalloinvest's 2016s each increased 0.8%, UFS said.

In other trading, South Africa finished up Friday with credit default swaps at 125 bid, 130 offered.

"Very impressive," a trader said. "More retail action on Investec Ltd., and again Eskom Holdings feels well supported."

Middle East in focus

Bonds from the Middle East ended the week with a positive tone, a trader said, with Emaar Properties, Jebel Ali Free Zone and Majid al Futtaim Holdings standing out.

"The star of the week was Dubai Water and Electricity Authority's 2020s as a few accounts and banks cottoned onto the fact it offered good value, closing 50 bps tighter on the week," he said.

Bahrain's 2022s were also popular, closing at 104.625 on the bid side, almost 50 bps tighter on the month.

Meanwhile, Dubai Holding was lagging a bit.

"There were multiple sellers today with the 2014s closing the week almost 25 bps wider. This company has a good recent history of paying bonds down," he said. "No sign of any supply from the region, but with this US holiday-shortened week and [payrolls] out of the way, the door is well and truly open."

Zambia on deck

One trader was anxiously awaiting next week's deal from Zambia, which is planning $500 million 10-year notes via Barclays and Deutsche Bank in a Rule 144A and Regulation S transaction.

"Finally, a new sovereign deal," a trader said.

Elsewhere in Africa, Angola's 2019 notes were trading with a 108 handle after pricing at par on Aug. 14.

In other news, market sources were whispering about possible dollar notes from Thailand's Kasikornbank, which is expected to complete a roadshow soon.

Mexichem plans roadshow

Mexico-based chemical company Mexichem is planning an issue of dollar notes that will be marketed during a roadshow next week, a market source said.

Citigroup, HSBC, JPMorgan and Morgan Stanley are the bookrunners for the Rule 144A and Regulation S deal.

The roadshow is expected to take place Monday and Tuesday.

Proceeds will be used to refinance existing debt, according to Moody's Investors Service.

Mexichem plans to repay $600 million of borrowings under its $1 billion revolving credit facility, a portion or all of the senior notes due 2019 through a tender offer and other existing bank debt.

Aruba notes oversubscribed

The recent $253 million issue of 4 5/8% notes due 2023 from Aruba, which priced at par, attracted about $2 billion in orders from 148 accounts, a market source said.

The notes were talked at a yield in the 4 7/8% area.

Credit Suisse and UBS were the bookrunners for the Rule 144A and Regulation S transaction.

Also oversubscribed was the new $600 million issue of 3% notes due 2017 from Chile's BCI, which priced at 99.426 to yield 3 1/8%, or Treasuries plus 245 bps.

Citigroup and JPMorgan were the bookrunners for the deal, which attracted $3 billion in orders.

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