Banco de Chile does deal; Treasury prices drop, EM trading weakens; Sekerbank revives deal

By Christine Van Dusen and Stephanie N. Rotondo

Atlanta, June 11 - Emerging markets assets on Tuesday started the session on a volatile note, yet again, as the protests in Turkey's Taksim Square escalated and U.S. Treasury prices plummeted.

"The market is chopping back and forth, and it's weaker, no doubt," a New York-based trader said. "There's some two-way flow, and some volume at certain levels. But pricing is erratic."

Adding to the volatility was Standard & Poor's upgrade of its outlook for the United States, as well as concerns about potential changes to the Federal Reserve's bond-buying program.

As riot police entered the square, Turkey's credit default swap spreads and cash bonds moved wider, a London-based analyst said.

"Today is a crucial day, with a meeting of the AK Party and a subsequent press conference, which may be important for the country's outlook," she said.

The Markit iTraxx SovX CEEME ex-EU index spread on Tuesday widened 18 basis points to Treasuries plus 229 bps. The Markit iTraxx Crossover index spread - quoted at 436 bps over Treasuries on Friday - moved out Tuesday to 474 bps.

Meanwhile, Banco de Chile SA priced an issue of Swiss franc-denominated notes.

In trading from Latin America, most bonds moved off their recent lows but stayed wider by 5 bps to 10 bps. But high-grade credits got a lift as the day went on.

"I think you're seeing pockets of liquidity. I've heard some guys have raised some cash and are waiting for stability to put some money to work," the New York trader said. "Valuations are as cheap as they've been in a year or more."

The key is Treasury rates, he said.

"If Treasuries stabilize, the markets will do OK," he said. "But if they kind of continue to deteriorate, then fixed income in general will continue to trade softer."

Homex misses coupon

Desarrolladora Homex SAB de CV saw its bonds dip slightly after the Mexican homebuilder said it had missed a coupon on its 2019 paper.

There were "only a couple trades" in Homex bonds, a trader said, with the 9½% notes ending "virtually unchanged to maybe down a [¼ point]" at 391/4.

The 7½% notes due 2015 were off a point at 38.

Homex will enter the 30-day grace period on the indenture. If it fails to make the coupon payment within that 30 days, it will officially be in default.

Like its sector peers, Homex has been struggling of late, burdened by heavy debt loads and a government that is pushing for more city-based apartment-style housing instead of single-family homes in the suburbs.

PDVSA loses steam

Tuesday also saw Petroleos de Venezuela SA's (PDVSA) bonds weaken after the Venezuela-based state-owned oil company announced it had signed yet another financing agreement.

A trader saw the 9% notes due 2021 decline more than 2½ points to 83 3/8, while the 8½% notes due 2017 fell 1 point to 911/2.

The 5 3/8% notes due 2027 were down nearly 2½ points at 601/4.

On Tuesday, PDVSA inked a $2 billion long-term credit line with Chevron International, its Petroboscan joint venture partner. Funds from the facility will be used for capital improvements at the Boscan heavy oil field, with the end goal of upping production by 20,000 barrels per day.

The loan priced at Libor plus 450 bps and matures 2025.

Ukraine bonds move wider

In trading from Ukraine, sovereign bonds have been moving wider so far this week, said Svitlana Rusakova of Dragon Capital.

On the corporate side, some demand was noted for the State Administration of Railways Transport of Ukraine's (Ukrzaliznytsia) recent 9½% notes due 2018.

The notes priced at par via Barclays, Morgan Stanley and Sberbank in a Rule 144A and Regulation S deal.

Bonds from the State Export-Import Bank of Ukraine (Ukreximbank) and JSC State Savings Bank of Ukraine (Oschadbank) have experienced some demand, she said.

"Though it wasn't easy to find an offer," she said.

Banco de Chile prices notes

In its new deal, Santiago-based Banco de Chile sold CHF 225 million notes due 2016 at par to yield Libor plus 60 bps, a market source said.

BNP Paribas and Deutsche Bank were the bookrunners for the deal.

And Moscow-based rotorcraft designer and manufacturer Russian Helicopters is still planning to issue dollar-denominated notes, a market source said.

The Regulation S-only deal was in question, given that a roadshow for the notes ended in April. But the market source said the deal is still active.

Sekerbank, Kazakhstan ahead

In other deal-related news, Turkey-based lender Sekerbank TAS has revived plans for a bond issue and will print €300 million of notes, a market source said.

No other details on the new offering were available on Tuesday.

In April the Istanbul-based lender canceled plans for a dollar-denominated offering of five-year notes after talk in the 5¼% area.

Citigroup, Standard Chartered and Unicredit were the bookrunners for that Rule 144A and Regulation S deal.

Market sources also were whispering on Tuesday about Kazakhstan's upcoming issue of $1 billion of notes. The sovereign has extended the deadline for potential bookrunners to September.

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