Pemex prints $3 billion of bonds; EM spreads tighten; better tone but light volumes

By Christine Van Dusen

Atlanta, July 11 - A $3 billion, four-tranche deal from Mexico's Petroleos Mexicanos SAB de CV (Pemex) was among the new issues to price on a Thursday that saw emerging markets bond spreads tighten on news that quantitative easing could continue in the United States.

"Pemex used the positive backdrop to issue paper, as did others," a New York-based trader said.

Federal Reserve Chairman Benjamin Bernanke's comments, indicating that the Federal Reserve's bond buying could continue, until the labor market strengthens further, gave US Treasuries a better bid on Thursday.

In response, EM spreads narrowed, with the Markit iTraxx SovX CEEME ex-EU index opening on Thursday at 235 basis points over Treasuries, tighter by 7 bps over Wednesday. The Markit iTraxx Crossover index spread - seen Wednesday at 439 bps - moved in 19 bps on Thursday.

"A generally better tone in the market," an analyst said. "Turkish sovereign paper is 1½ points to 3 points better, despite the current account deficit miss."

Among Turkish corporates, Koc Holdings AS was an outperformer, tightening 10 bps.

"However, Turkish banks are 3 bps to 5 bps wider," she said.

From the Middle East, Dubai continued to be favored.

"Dubai's 2022s are now 20 bps tighter on the day," a trader said.

Latin American sovereign bonds, which on Wednesday went out "weakly and meekly," picked up steam on Thursday morning after Bernanke's comments, the New York trader said.

"Spread-based credits are once again leading the charge, in terms of compression," he said. "Off-the-runs are lagging, as usual, but most of those have at least ticked up to match Treasury performance."

Still, volumes were relatively low for most of the session, he said.

"Treasury volatility keeps everyone on their toes," he added.

Lat-Am corporates tighten

Many Latin American corporate bonds tightened as much as 15 bps by day's end, another New York-based trader said.

"Venezuela and PDVSA bonds tried to rally early on but lost most of that price appreciation as the day went along, closing near unchanged," he said.

It remains to be seen whether the sell-off in emerging markets is over for now, he said.

"Or do we see new issues jump into the market, meeting any demand, leaving the EM market vulnerable again to any backup in US rates or sell-off in equity markets?" he said.

Pemex prices notes

In its new deal, Mexico-based petrochemical company Pemex priced a four-tranche issue of $3 billion notes due in five and 10½ years in a Rule 144A and Regulation S deal, a syndicate source said.

The deal included $1 billion 3½% notes due 2018 that priced at 99.542 to yield Treasuries plus 220 bps. The notes were talked in the 230 bps area.

The second tranche of $1 billion 4 7/8% notes due 2024 priced at 99.481 to yield Treasuries plus 235 bps. The notes were talked at a spread in the Treasuries plus 245 bps area.

FRNs from Pemex

Pemex's third tranche - $500 million floating-rate notes due in 2018 - came to the market at par to yield Libor plus 202 bps.

Pemex also priced an increase of its existing 6½% notes due June 2, 2041 at 99.556 to yield Treasuries plus 290 bps.

Barclays, Morgan Stanley and Santander are the bookrunners for the deal.

Middle East in focus

Abu Dhabi Commercial Banks's 2019s were well offered on Thursday, a trader said.

Sharjah Islamic Bank's 2018s were trading at 95 bid, 95¾ offered.

"Still 53 bps wider on the month," he said.

Qatar's 2040s and 2042s are 15 bps tighter on the week.

And Bahrain Telecommunications Co.'s 2020s were spotted at between 92½ and 931/2, about 6 bps tighter on the week.

ADIB perpetuals trade up

Perpetual notes from the Middle East on Thursday were still on investors' radar screens.

The notes that Dubai Islamic Bank priced at par were trading at 98¼ bid, 99 offered, while Abu Dhabi Islamic Bank's traded at 100¼ bid, 101¼ offered after pricing at par.

In other trading, South Africa's 2016s experienced some two-way activity, a trader said.

Nigeria notes still active

Nigeria's recent issue of 5 1/8% notes due 2018 that priced at 98.917 traded Thursday at 99¼ bid, par offered after Wednesday's levels of 99.120 bid, 99.870 offered, a trader said.

The sovereign's second tranche - $500 million 6¾% notes due 2023 that came to the market at 98.193 - was also quoted Thursday at 99¼ bid, par offered. On Wednesday the notes were seen at 99.120 bid, 99.870 offered.

The proceeds will be used to finance infrastructure investments.

Ukraine bonds under pressure

From Ukraine, sovereign bonds have been under a bit of pressure, said Svitlana Rusakova of Dragon Capital.

"Corporates saw decent two-way flows," she said, pointing in particular to the 2018 bonds for Oschadbank and other Ukrainian issuers.

Eustream sets talk

In deal-related news, Slovakia's Eustream talked a €500 million issue of notes due 2020 at mid-swaps plus 235 bps, a market source said.

Citigroup, ING, JPMorgan, KBC and Erste Group were the bookrunners for the Rule 144A and Regulation S deal.

Eustream is a Bratislava, Slovakia-based gas transmission company.

Korea Finance gives guidance

Korea Finance Corp. set price talk in the mid-swaps plus 80-bps area for a €500 million issue of five-year notes, a market source said.

BNP Paribas, Commerzbank, Credit Suisse, HSBC, Standard Chartered Bank, DZ Bank and Natixis are the bookrunners for the Regulation S-only deal.

Korea Finance is based in Seoul, South Korea

Low-6% area for Naspers

South Africa's Naspers Ltd. set talk in the low-6% area for its dollar-denominated and benchmark-sized issue of seven-year notes, a market source said.

Barclays, Citigroup (active) and JPMorgan (passive) are the bookrunners for the Rule 144A and Regulation S deal.

Naspers is a mass media company based in Cape Town.

Indonesia deal oversubscribed

The final book for Indonesia's new $1.75 billion issue of 5¼% notes due 2042 that priced at 98.148 to yield 5 3/8% was $1.9 billion from more than 120 accounts, a market source said.

About 49% of the orders came from the United States, 26% from Europe and 25% from Asia. Funds accounted for 71%, pension funds and insurers 19%, banks 6% and private banks 4%.

HSBC, JPMorgan and Standard Chartered were the bookrunners for the Rule 144A and Regulation S offering.

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