Emerging markets rally on Greece bailout plan; Saudi Fransi, Magnesita Refratarios price

By Christine Van Dusen

Atlanta, March 25 - Emerging markets rallied Thursday as Greece took one step closer to getting a financial bailout and some issuers priced new deals, market sources said.

France and Germany, during a meeting of E.U. leaders, mapped out a plan that would provide debt-saddled Greece with a mix of funds from the International Monetary Fund and European nations. The plan was deemed satisfactory by Greek leaders, and as a result emerging markets staged "something of a rally," a strategist said.

The day also got a boost from the news that Dubai World will pay its bondholders in full if its banks approve a debt restructuring plan that includes the planned issuance of five- and eight-year bonds. This pushed subsidiary Nakheel PJSC's bonds up 45%, a market source said.

"There's also the spread compression, because Treasuries are selling off somewhat because of the bad auction so far this week," the strategist said. "All of this is helping to prop up general risk sentiment. Emerging markets are rallying on the back of that."

Still, Thursday saw some underperformers. Brazil, for example, "has been so overbought for such a long time that it's not doing very well," he said. "There may be some profit-taking elsewhere."

Prices for Venezuela's benchmark bond were down about 0.40 of a point on Thursday, and Argentina discounts were off almost a point. "Brazil's 40s are down about 20 cents today, and Mexico is down 45 cents," he said.

But the picture is likely to be very different come next month, the strategist said. "New issuance will be heavy and investors will be receiving lower coupon income than usual," he said. "There may be some positioning ahead of that."

Thursday did feature some new issuance of its own.

Saudi Arabia's Banque Saudi Fransi brought to market a $650 million offering of 4¼% bonds due 2015 at 99.543 to yield Treasuries plus 196.3 basis points.

And Brazil's Magnesita Refratarios SA priced $400 million 7 7/8% bonds due 2020 at 99.151 to yield 8%, or Treasuries plus 413 bps.

Also on Thursday, India's Axis Bank launched a $350 million issue of 51/2-year bonds after canceling a similar offering in November.

Inflows up again

Emerging markets bond funds saw inflows of $1.05 billion for the week ended Wednesday, according to data tracker EPFR Global. That's up from $587 million of inflows the previous week and represents the 20th consecutive week of inflows, said Cameron Brandt, global senior analyst for EPFR.

"There's a little more optimism regarding the health of the U.S. economy, so that has people thinking about commodity demand and dollar weakness, and recent export figures certainly seem to support that," he said. "There's also a pretty good pipeline of good-looking issues out here at the moment.

"People are quite happy to get access to that. They're certainly gravitating toward this asset class at the moment."

Banque Saudi Fransi prices

Banque Saudi Fransi priced $650 million 4¼% bonds due March 30, 2015 (Aa3/A/A) at 99.543 to yield Treasuries plus 196.3 bps, an informed market source said.

Citigroup, Credit Agricole CIB and Deutsche Bank were the bookrunners for the Regulation S-only deal.

Banque Saudi Fransi is a banking company based in Saudi Arabia.

Magnesita prices bonds

Brazil's Magnesita Refratarios priced $400 million 7 7/8% bonds due March 30, 2020 at 99.151 to yield 8%, or Treasuries plus 413 bps, according to market sources.

JPMorgan, BB Securities, Banco Bradesco BBI and Banco Itau were the bookrunners for the Rule 144A and Regulation S deal, which includes a five-year call.

The deal was talked at 8¼% to 8½%.

Magnesita Refratarios is a supplier of refractories for the steel and cement industries and is based in Contagem, Brazil.

Axis Bank launches

India's Axis Bank is planning a $350 million issue of 51/2-year bonds (/BBB-/), a market source said.

This follows the bank's decision in November to cancel a planned dollar-denominated offering of benchmark bonds after a roadshow in Singapore, Hong Kong and London.

Other details were not available Thursday.

Axis Bank is a Mumbai, India-based financial services company.

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