Greece fears silence primary market, widen spreads for EM; America Movil on roadshow

By Christine Van Dusen

Atlanta, Oct. 4 - Continued concern about a default from Greece made for a "wild day" for emerging markets assets on Tuesday, with limited liquidity, wider spreads and some selling.

"It's been a wild day and huge stress remains in the market," a trader said. "Unless you are a sukuk or a bond from the Lebanese Republic, you basically suffered from a severe re-pricing."

Flow-wise, it was a busy day, a London-based trader said.

"It was a super-busy morning," he said. "It was very heavy, with clearly some towels being thrown in and dealers hitting any half-meaningful bids."

Said another trader, "The high betas are getting smoked again, with bonds marked 3 to 5 points lower and nobody arguing about it. Client activity remains very light, given the magnitude of the moves, and retail [investors] do still generally buy, albeit in small amounts. As you can imagine under these conditions, things are becoming very dislocated."

Qatar, for one, moved 20 basis points to 25 bps wider. "That's a decent move for the credit, but there is liquidity and there are bids, so it becomes a victim of its success, in a way," another trader said.

Abu Dhabi was mixed, with sovereign paper 15 bps wider and the quasi-sovereigns between 25 bps and 35 bps wider.

"Big moves on these names," he said. "We've seen a little bit of selling on Qatar Islamic Bank and First Gulf Bank but overall the sukuks are holding in better than conventionals. Surprised? Nope, me neither."

Sharjah Islamic Bank was trading at 104.87 bid, 105.37 offered.

"That's an amazing bond, and redemption of their floating-rate notes soon will see that money move into the sukuk," he said.

In terms of the primary market, activity was muted, with just Mexico's America Movil SAB de CV setting out on a roadshow.

Dubai bonds in 'pain'

Good selling was seen for Dubai's 2012s, moving the bonds to fresh lows, a trader said.

"The rest of Dubai is anywhere from 45 to 55 bps wider for the sovereign and 30 to 40 bps wider on Emaar Properties and Emirates," he said. "Dubai Water and Electricity Authority moves 50 to 60 bps wider, except for the very squeezed 2016s."

DEWA's 2020s finished the day at 901/2, about 215 bps wider on the month while Dubai's 2020s are now more than 200 bps wider on the month.

"Pure pain on those credits," he said.

Qtel widens

Qatar's Qtel International saw its 2021s trading at 96.5 bid, 97.5 offered, about 100 bps wider on the month.

Better buying was seen for the company's 2016s and 2019s early in the session.

By day's end, the company's 2025s were 55 bps wider on the week.

"Having been a market darling for a long time, it went from 89 in March to 101.50 in September and is now at 95 bid, 95.75 offered," a trader said.

Qatar heavy, Lebanon 'a rock'

Also from Qatar, Qatar National Bank's 2015s were trading at 98.62 bid, 99.62 offered, about 50 bps wider on the week. The sovereign was very heavy and 20 bps to 25 bps wider on the day.

"We're starting to see some nibbling on Qatar names," he said. "Lebanon is still holding in well. It's just a rock."

He noted that Lebanon's 2016s were seen at 115.43 bid.

Another trader was continuing to watch Dar Al-Arkan International Sukuk Co. II. The issuer's 2015s were seen in the mid-80s on Tuesday morning.

"Speaking of zero liquidity, I'm closing Dar Al-Arkan's 2015s at 80 to 85," he said. "Interesting that there were a few bids around on their 2012 floating-rate notes, but again, liquidity is just very poor."

Bahrain struggles

In other trading from the Middle East, Bahrain struggled.

"Their 2020s were very heavy from the word 'go,' at 91.5 bid, 92.5 offered or wider by 50 bps," he said.

Abu Dhabi National Energy Co. (TAQA) saw its 2013s get some two-way interest.

"Clearly many dealers have had taps on the shoulders, many funds have had outflows and are pre-empting redemptions, and dealers have limited ability to take down paper," a trader said. "As such we can still push a lot lower on some of the cash bonds in my world as it feels a lot of locals are on a buying strike, apart from sukuks, of course. Nonetheless, for those with cash and looking for value, the value has arrived in stunning style."

Selling seen for benchmarks

In other trading, heavy selling was seen all morning for benchmark bonds like those from Gazprom, Lukoil and Vimpelcom, a trader said.

Gazprom finished the day 20 bps wider.

"Russian corporates are all off the earlier lows now," he said during the European afternoon. "The market is really going after the banks today."

Said another trader, "Russia's 2030s have come back to life with a vengeance, trading in good size all day from 112 to 110 and going out in the middle."

And Kazakhstan-based BTA Bank's 2018s remained down at 41.

Turkey outperforms

After an initial panic sell-off in the morning, Turkey's bonds stabilized a bit, about 15 bps wider.

"Turkey was one of the outperformers of the day," a trader said.

But liquidity remains very poor, another trader said.

"Although corporates and sovereigns are down 1 to 1½ points, Turkey is still outperforming its peers," he said.

Garanti Bankasi AS' 2021s and Finansbank's 2016s traded down.

"They were hit several times during the day," he said.

And Yuksel Insaat was down 7 points on the day.

"Retail looked to add Akbank 2015s in small amounts," he said.

Ukraine suffers

Looking to Ukraine, the sovereign's bonds took a beating on Tuesday.

"Really only Ukraine's 2013s, 2020s and 2021s are trading," a trader said.

Said another trader, "Losers today included Ukraine, which finished 75 bps wider."

Meanwhile, South Africa was unchanged.

"Retail [investors] do continue to nibble at brand-name assets in my world, and there are still a few bonds with dealer shorts that offer some liquidity," another trader said. "South Africa's sovereign curve is one stellar example of where the curve continues to be fairly normal."

America Movil considers bonds

In other news on Tuesday, Mexico's America Movil set out on a roadshow with Deutsche Bank, a market source said.

The roadshow began Tuesday and will travel through London, Edinburgh, Paris and Amsterdam before concluding in Frankfurt on Oct. 7.

A bond transaction may follow.

The Mexico City-based telecommunications company recently priced $2.75 billion of notes in two tranches. The deal - which came to the market in late August - included $2 billion of five-year notes with a 2 3/8% coupon that priced at 99.188 to yield 2.549% and a $750 million add-on to its 6 1/8% notes due March 30, 2040 that priced at 108.916 to yield 5.502%.

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