Russia bonds holding 10 bps tighter; emerging markets bond funds see $522 million inflows

By Aleesia Forni

Columbus, Ohio, March 29 - The $7 billion burst of new supply from Russia has given rise to a "brave new world" in emerging markets debt, a trader in Europe quipped on Thursday.

The new deal is seeing "awesome performance," as all bonds were holding roughly 10 basis points tighter at the end of London's session.

At a 65 bps spread over the 10-year issue, the bond looks to offer value versus the "much flatter" curves in South Africa, Turkey and Qatar, according to a London-based source.

"The new [bonds maturing 2042] are the new EMEA benchmark and will dominate trading going forward," the source continued.

Accounts in the United States took the lion's share of the Russian deal and were holding onto the paper, while the source saw a great deal of flipping at London's open.

To recap, Russia priced $2 billion of 3¼% five-year notes at Treasuries plus 230 bps, $2 billion of 4½% 10-year notes at Treasuries plus 240 bps and $3 billion 5 5/8% 30-year bonds at Treasuries plus 250 bps.

BNP Paribas, Citigroup, Deutsche Bank, Troika Dialog and VTB Capital were the bookrunners.

Meanwhile, cash continues to flow into emerging markets bond funds, which saw $522 million of inflows for the week, according to a figure provided by fund-tracker EPFR Global. That was less than last week's $851 million.

The latest week's flow increased
the year-to-date inflows to $14.36 billion, according to EPFR Global.

New Saudi Electricity bonds

The other focus in the secondary market remains on Saudi Electricity Co.'s (A1/AA-/AA-) $1.75 billion issuance of five- and 10-year bonds, which both settled around 101 on Thursday, according to a market source.

The $500 million of 2.665% five-year sukuk priced at par to yield mid-swaps plus 140 bps.

The $1.25 billion tranche of 4.211% 10-year paper sold at par to yield mid-swaps plus 195 bps.

Also in the secondary, Argentina was off 6 points on the week, which dents the appetite for high-risk, according to a market source.

China Resources launch

In the primary market, China Resources Gas Group Ltd. launched a $750 million offering of 10-year fixed-rate senior unsecured notes (Baa1//BBB+) at Treasuries plus 260 bps, according to a market source.

Citigroup and Deutsche Bank are the global coordinators for the Regulation S deal and are joined by JPMorgan, HSBC, UBS and Standard Chartered as joint bookrunners.

A roadshow with institutional investors began on Thursday.

The deal is subject to market conditions. The notes will be issued under the company's $1.5 billion global medium-term note program.

The Hong Kong-based liquefied gas company intends to use proceeds for general corporate purposes, including acquisitions and working capital.

Globo bookrunners

Also in the primary on Thursday, Globo Comunicacao e Participacoes SA (Baa2/BBB/BBB+) mandated HSBC and Itau BBA to arrange fixed-income investor meetings ahead of the issuance of $200 million of senior exchangeable notes by Pontis II Ltd., according to a market source.

Meetings are scheduled to get underway in London on March 30, in New York on April 2 and in Boston on April 3.

The notes will be exchanged into Globo's amended step-up senior notes due 2022.

Subject to market conditions, a separate Regulation S transaction may follow.

The media company has headquarters in Rio de Janeiro.

XacBank roadshow

XacBank LLC began a roadshow on Thursday for a proposed issue of three-year dollar-denominated bonds (Ba3//B), according to a syndicate source.

ING and UBS are managing the deal.

The notes will be issued under the Ulaanbaatar, Mongolia-based bank's $300 million medium-term note program.

Proceeds will be used for funding and general corporate purposes and to refinance existing non-deposit funding maturing in 2012.

Rurail note offering

Russian Railways (Rurail) (Baa1/BBB/BBB) may also to head to market, as the Moscow-based company is expected to launch a benchmark 10-year dollar-denominated note offering, according to a market source.

The deal is expected to come through JPMorgan, RBS and VTB.

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