Ghana prices $750 million; emerging markets primary still moving; secondary mixed; Turkey gains

By Aaron Hochman-Zimmerman

New York, Sept. 27 - Emerging markets trading was flat to mixed but new deals continued to make their way through the pipeline.

Negative news from the U.S. Commerce Department about an 8.3% drop in new home sales during August was not enough to move the secondary market in one direction or the other, although Turkey's new sovereign bonds were a notably strong performer.

In the primary, for the third day in a row, it was a sovereign showing the leadership with Ghana bringing a $750 million issue.

Still corporates contributed, with one deal priced and two new offerings announced.

Emerging markets as a sector widened out slightly, according to JP Morgan's EMBI+ index. The index which quantifies the amount of yield investors require to buy emerging markets finished with a spread wider by 3 basis points at 203 bps.

Primary keeps the streak alive

Two deals totaling $790 million were able to price, as the pipeline slowed from Thursday's volume but gave no indication it had provided its last new issue.

"I hear that corporate pipeline is slowly coming back online," said Enrique Alvarez, a Latin America debt strategist at IDEAglobal.

Ghana priced a $750 million 10-year bullet (B+/B+) at par with a coupon of 8½% or a spread of Treasuries plus 387 bps.

The deal priced on the tight end of the talk, which had put the yield between 8½% and 8¾%.

Citigroup and UBS brought the deal to market.

"Ghana has been the biggest for me personally," a syndicate desk official said.

"It's not a bad deal, it's expensive, it reminds me of the time before the crisis," he said.

LatAm primary active

Brazil's GP Investments Ltd. priced a $40 million reopening of its 10% perpetual senior bonds (B+/B) at 102.125.

Credit Suisse had the books for the deal.

The notes may be called in 2012.

Proceeds from the sale will be used for investments and general corporate purposes.

GP Investments is a Sao Paulo-based asset management firm.

A buyside source quoted the new add-on trading at 103.50, up from its issue price by a healthy margin.

Banco de Credito del Peru announced its intention to sell a $160 million nuevo sol-denominated 15-year subordinated bond (Baa3/BB+/BB+).

Morgan Stanley has been mandated as the bookrunner for the deal.

A roadshow will be held in London on Oct. 1, in New York on Oct. 2, Los Angeles on Oct. 3 and Boston on Oct. 4. Pricing is expected following the roadshow.

The bonds feature 10 years of call protection.

Interest rates are fixed for the first 10 years, then adjust semi-annually to 150 basis points over the yield to maturity of Peru's sovereign due 2037.

Proceeds from the sale will be used to increase regulatory capital and for general corporate purposes.

Banco de Credito del Peru is a Lima, Peru-based commercial and investment bank.

Argentina's Edenor SA announced plans to offer a $250 million 10-year bond from its $600 million program.

Citigroup and Deutsche Bank will act as bookrunners.

Edenor is a Buenos Aires, Argentina-based energy distribution company.

Secondary quiet

The secondary which was tame and seemingly uninterested in the housing data, deferred to the primary for the major action over the day's session.

"[The market behaved] pretty much as predicted," according to IDEAglobal's Alvarez, who had said earlier in the week that the market was "well poised" for any bad news which may come from the United States.

Alvarez described the market's unwillingness to budge as a sort of equilibrium over further Federal Reserve Bank rate cuts.

"It's a two-way street," he said.

If the market performs well, then no action is necessary. If the market performs poorly, it is more likely rates will be eased and the market will react positively, he said.

"It'll play out over time," he said, indicating that investors will probably have their answer to questions over which way the market will turn by the first quarter of next year.

New Turkey bonds higher

Turkey was the biggest winner of the day as its new sovereigns jumped 0.75.

The new $1.25 billion of Turkish 6.75% notes due 2017, which priced Wednesday, were "several times over-subscribed," according to a syndicate desk official. They finished the day up approximately 0.75 around 100, improved from their issue level of 99.26.

Russian, CIS banks hurting

Prices were mostly higher in Europe, but with notable exceptions.

"Everything is fine but, and there is a big but, banks in Russia and Kazakhstan have not been trading at all, you don't find prices," he said.

"Everybody wants to avoid them," he added.

Kazakhstan's Alliance Bank was particularly bad.

"All of them are quite lousy," the syndicate official said.

"Defaults should increase over the next year ... Money has been too easy for them," Alvarez said.

Meanwhile rumors of a local issue to the tune of 35 billion rubles from Russia's OAO Gazprom are circulating, he said.

The amount of assets backing Gazprom isolates it from many market worries and gives it freedom to move where no other issuer could, he added.

In the Middle East, a market source noted that Saudi Arabia has placed itself in a difficult position by having oil prices linked to the dollar.

Although oil prices remain high, it is highly possible both the dollar and oil will depreciate leaving the Saudis with high inflation rates and a wounded economy, the source said.

Philippines higher

From Asia, Philippines sovereign debt, like Turkey's new bonds due in 2017, tied Turkey's 0.75 gain as the best for the day and were seen trading around 103.50.

Ahead of anticipation of a rate cut from the Philippine central bank, the peso rallied and bonds followed.

The peso ended the day up on the dollar at 63.927.

Issues in the region have recently managed a turnaround from fears that high food and oil prices will lead to broader inflation.

In trading Thursday, Thailand's government bonds were generally flat, despite inflation concerns which may discourage the central bank from cutting interest rates in the near future.

Thai sovereigns due 2017 traded up around 0.25 to approximately 102.05.

On a flat day, the baht ended at 31.505 to the dollar.

LatAm trading mixed as primary leads

Latin America made more primary noise than it did with its own mixed trading. In Brazil, the real showed the most movement jumping to a seven-year high against the dollar.

Trading was tested with more negative news out of the United States housing market. There is concern that Latin America may be dragged down by a faltering U.S. economy, according to Alvarez.

"It all seems normal and natural, the entirety of EM has become so complacent to negative news," he said about investor reaction to the data release.

"The market prefers to do nothing," he said.

Any gains or losses posted were too small to be of any consequence, he said.

Brazil's ongoing issue of inflation and high 11.25% benchmark lending rates have not done any serious damage to it star 11% sovereigns due 2040. The notes gained 0.20 Wednesday to finish at 133.85 bid, 133.90 offered.

The real climbed to a high against the tumbling dollar that it has not seen since 2000, closing at 1.841 to the dollar.

Argentina which, along with Venezuela, expects to announce the results of sale of their Bono del Sur Friday, lost about 0.20 from its high-beta benchmark sovereign. The 8.28% notes due 2033 were seen trading at 91.80 bid, 92.15 offered.

Venezuela managed to post gains to its 9.25% government bonds due 2027. The notes finished at 105.40 bid, 105.50 offered.

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