Gold Fields sets investor meetings; PGNiG eyes bond offering; market in 'risk-off' mode

By Paul A. Harris

Portland, Ore., Aug. 25 - Liquidity remained extremely thin in emerging markets bond activity on Thursday, although investors' aversion to risk continued to make itself felt.

The EMBI Global Diversified Index closed at 348 basis points bid, 3 bps wider on the day.

A debt capital markets banker in London uses the iTraxx Europe Crossover index for measuring the appetite for risk.

On Thursday the index's spreads came down from the 30-day highs it posted on Wednesday. The banker spotted the index at 698 bps bid, 701 bps offered at Thursday's European close, having narrowed from the previous day's close of 715 bps bid, 720 bps offered.

However, a significant measure of the risk aversion now in the market can be had by comparing the Thursday close to spreads seen one month previous: on July 25 the index closed at 429 bps bid, 431 bps offered.

Thursday's slight improvement from Wednesday's levels notwithstanding, the iTraxx Europe Crossover index has widened by an eye-popping 269 bps in one month.

Investment-grade emerging markets bonds held in pretty well on Thursday, according to David Spegel, head of emerging markets strategy at ING, who spoke after the New York close.

However high-yield emerging markets names were down about ¼ point on average, with most of the selling occurring after 10 a.m. ET, in line with the stock market, the strategist added.

"We are in a very illiquid period," Spegel commented. "Most of the activity is Street-driven."

In the primary market, South Africa's Gold Fields Ltd. (Baa3/BBB-) is planning meetings with fixed-income investors starting on Sept. 6.

And Poland's Polskie Gornictwo Naftowe i Gazownictwo SA (PGNiG) announced that it plans to sell up to €1.2 billion of fixed-rate or floating-rate notes.

The Wyoming watch

"Liquidity in corporate names has dried up almost completely over the past couple of weeks," said a London-based trader who focuses on Central European and Middle Eastern sovereign and corporate bonds.

The reason, once again, is risk aversion, explained the trader.

"The market is being driven by bigger stories," the trader noted, adding that the market's focus presently seems riveted on Fed chairman Ben Bernanke's scheduled Friday morning speech in Jackson Hole, Wyo., where the Kansas City Federal Reserve is hosting the annual Federal Reserve conference. Although policy-making is not what the conference is for, observers are anticipating that Bernanke, in his Friday remarks, might give some indication of Fed policy goals going forward.

Earlier, a trader in Singapore reported that the East Asian bond market has been difficult.

"China names, both property and non-property, have been the hardest hit," said the trader who spoke late in the session in Singapore.

"The better quality Indonesian names are holding up better, but any company with perceived credit issues is getting hit hard, irrespective of location," the trader added.

Indonesia's PT Bakrie Telecom Tbk.'s 11½% notes due 2015 are 15 points lower since the end of last week, the trader said, noting that the telecommunications provider recently reported that it moved to a net loss in the first half of 2011 versus a profit a year earlier, although its revenues were slightly higher.

Meanwhile a market source confirmed the trader's color on Chinese paper. Evergrande Real Estate Group, Ltd.'s 13% guaranteed senior notes due in 2015 were 92½ bid, slightly better on the day, the source said.

However that issue was trading at 103½ bid at the end of July.

Gold Fields mandates banks

South Africa's Gold Fields Ltd. (Baa3/BBB-) has mandated Bank of America Merrill Lynch, Barclays Capital and JPMorgan to arrange a series of meetings with fixed-income investors starting on Sept. 6, according to a market source.

A Rule 144A and Regulation S note offering could follow, subject to market conditions.

The publicly traded Johannesburg gold producer was formed in 1998 with the merger of Gold Fields of South Africa Ltd. and Gencor Ltd.

PGNiG announces €1.2 billion

Poland's PGNiG announced in a Thursday press release that it plans to sell up to €1.2 billion of fixed-rate or floating-rate notes with maturities of up to 10 years (Baa1).

SG CIB, BNP Paribas and Unicredit have been designated to manage the sale.

The Warsaw-based, state-controlled oil and natural gas company plans to use the proceeds for general liquidity purposes.

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