FirstRand prints notes; EM resilient amid economic concerns; South African names trade up

Atlanta, June 2 - South Africa's FirstRand Bank Ltd. sold notes on Thursday as the news that Greece could get three more years of loans helped buoy emerging markets assets even as investors worried about the upcoming payrolls report from the United States.

"Despite the general re-pricing going on in global equities, the majority of [EM] is trading very well," a trader said.

Said another trader: "It's been an impressive morning all around, with all the low-beta EM names like South Africa and Russia up to 10 basis points firmer in some issues."

Also performing well on Thursday was the recent issue of notes from Dubai's Emirates airline, as well as Abu Dhabi, Tunisia, Ghana and Sharjah-based SIB Sukuk Co. II Ltd.

The JPMorgan Emerging Markets Bond Index Plus started Thursday close to the previous day's level, before tightening by 10 bps to Treasuries plus 283 bps. Most sovereigns were between 8 and 12 bps tighter, according to a report from RBC Capital Markets.

"External debt spreads, which pushed higher during much of yesterday, have held close to this level," RBC said.

FirstRand prices bonds

In its new deal, South Africa-based lender FirstRand Bank sold $350 million 4 3/8% senior notes due June 9, 2016 at 99.548 to yield 4.477%, or mid-swaps plus 262.5 bps, a market source said.

The notes - which had been expected to total $300 million - priced at the low end of talk, set at mid-swaps plus 262.5 bps to 275 bps.

FirstRand Bank, JPMorgan, Mitsubishi UFJ Securities, Standard Chartered Bank and UBS were the bookrunners for the Regulation S notes.

"The new deal jumped nearly 2 points on the open before hitting a wall of supply and settling back in at 100.85, or 20 bps firmer from new issue. I never knew people liked South African banks that much," a trader said. "The deal had a $1.7 billion book, which once again shows how EM keeps on trucking even when the rest of the world is stalling."

South Africa in demand

The good fortune spilled over into other names from South Africa, including the sovereign, which saw demand on Thursday.

"South Africa is seeing another wave of buying," a London-based market source said.

Also from Africa, Egypt's 2020 bonds were 25 bps tighter on the week while Morocco saw good bids on its euro-denominated notes, a trader said.

"Egypt goes to the top of the class," he said. "Solid demand was seen for all the peripheral credits: Morocco, Tunisia, Jordan, Ghana were all well supported. GTB Finance BV's 2016s printed at 103 late in the day. Nigeria's 2021 dollar notes were lagging a little."

And the African Export-Import Bank (Afrexim) saw better buying of its 2014 dollar notes at about 112.25 bid, 112.75 offered.

"Spread-wise, it's unchanged on the week," he said.

ADB oversubscribed

The FirstRand deal followed the pricing of Philippines-based Asian Development Bank's (ADB) $1.5 billion 7/8% notes due June 10, 2014, which came to the market on Wednesday at 99.767 to yield Treasuries plus 23 basis points, according to a company announcement.

Bank of America Merrill Lynch, Daiwa Capital Markets, Deutsche Bank and UBS were the bookrunners for the deal.

The final book totaled more than $2.5 billion, the issuer said, with 55% of the orders from Asia, 25% from the Americas and 20% from Europe, the Middle East, and Africa. Central banks and official institutions accounted for 76%, fund managers 17% and others 7%.

ADB last issued $2.75 billion of 2½% notes due 2016 on Feb. 14 at 99.603 to yield Treasuries plus 24.65 bps. It plans to raise a total of between $13 billion and $15 billion from the bond markets this year.

Emirates stays above re-offer

In other trading on Thursday, the new issue of $1 billion 5 1/8% notes due 2016 from Dubai-based airline Emirates - which priced Wednesday at 99.904 to yield mid-swaps plus 330 bps - opened at 100.35 bid, 100.45 offered.

The notes were later seen fading to 100.24 bid, 100.34 offered. During the European afternoon the notes traded at 100.10 bid, 100.20 offered.

"The new Emirates is struggling to keep up with U.S. Treasuries retracement, with the 10-years back at 3%," a trader said. "But it's still holding above re-offer."

Thursday also saw steady and impressive performance from Abu Dhabi, he said. And the recent issue of notes from the United Arab Emirates' Sharjah Islamic Bank, issuing through SIB Sukuk Co. II Ltd. - $400 million 4.715% notes due 2016 that priced at a spread of 270 bps over mid-swaps - traded a few times during the morning near 102 after trading Wednesday at 101.93 bid, 102.18 offered.

Middle East sees buyers

Also among names from the Middle East, buyers were seen for Bahrain-based BBK's 2015 notes and Central Bank of Bahrain's 2014s while Sabic Capital was quiet but well supported, a trader said.

"Qatar is holding steady," he said. "There's solid support and good two-way flow."

Solid demand was also noted for Kuwait's Kipco.

"It's an amazingly resilient market," he said. "The bottom line is that the U.S., China and euro-land issues and concerns appear to see more cash allocated to [Gulf countries and the Middle East and North Africa]. Adding fuel to the fire are the locals who are cash-rich."

In other trading, Turkey fell by the wayside, given all the attention on South Africa.

Kazakhstan names lag

Kazakhstan banks are still not benefitting from the EM mood, a London-based trader said, with BTA Bank's 2018s still unchanged at the 88 to 89 lows.

BTA was, however, seeing decent volumes going through, another source said.

"And JSC Kazkommertsbank's results simply confirmed the issues in the sector, though the recent 2018 dollar notes see good demand," he said.

Ukraine was an underperformer, wider by 10 bps, which "makes sense given their domestic auction failed yesterday," a market source said.

Venezuela plans more issuance

In other news, Venezuela's President Hugo Chavez recently announced that he will bring to his National Assembly a plan for an additional $10.5 billion-equivalent in debt issuance, nearly doubling the amount previously authorized, according to a report from Barclays Capital.

"It has not bee specified whether this new amount will be issued in the domestic or international market," Barclays said. "Even if most of the financing is expected to come from the domestic market, we are increasing our total expected international issuance for 2011 from $10.5 billion to 12 billion."

Of that total, national oil company Petroleos de Venezuela SA (PDVSA) already has issued $3 billion and is expected to sell $6 billion more.

"The issuance from the government is expected to materialize toward the fourth quarter of the year," the report said.

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