Emerging market debt rebounds after two-day losing streak; three corporates price deals

By Reshmi Basu and Paul A. Harris

New York, Sept. 8 - Emerging market debt ended a two-day skid Friday on the back of stronger performances by U.S. equities and Treasuries.

In the primary market, three corporates raised funds.

Korea's Hana Bank priced a $400 million issue of 5 7/8% 10-year lower tier 2 notes at mid-swaps plus 72 basis points. The issue came at 99.68.

Barclays Capital, BNP Paribas and Deutsche Bank were the lead managers for the Regulation S notes.

The Development Bank of Philippines priced a $130 million issue of perpetual hybrid tier 1 securities at par to yield 8 3/8%.

The yield came lower than the 8¾% area price guidance.

The notes are callable on Sept. 15, 2016. If not called, the coupon steps up to three-month Libor plus 487.8 basis points.

Barclays Capital and Deutsche Bank were lead managers for the Regulation S issue.

And Russian Standard Bank sold a €400 million offering of bonds (Ba2/B+) at par to yield 6.825% or mid-swaps plus 300 basis points.

Barclays Capital and Credit Suisse were the lead managers for the Regulation S deal.

EM higher

In trading, emerging market debt edged higher amid a more supportive backdrop.

The previous sessions had seen renewed concerns about the direction of U.S. monetary policy, which chipped away at investors' appetite for risk. Additionally, a heavy dose of new issues as well as announcements of three sovereign debt buybacks dragged down technicals. As a result, emerging market debt saw wider spreads.

However, Friday's session saw a reversal as the market began to absorb the new supply, according to market sources. Adding support, U.S. stocks rallied on lower oil prices and supportive comments made by a Federal Reserve official regarding inflation and interest rates.

In the absence of U.S. economic data, the focus was turned to remarks made by Cleveland Fed president Sandra Pianalto, who said that slower U.S. economic growth would offset inflation worries. That reassurance also helped U.S. Treasuries make slight gains.

"The [EM] market was better supported today [Friday]," said a trader.

"The market needed some time to digest all the new supply that came at once," he added.

"We expected a lot of deals within two weeks - not all in one day."

Against a more benign backdrop, emerging market debt was firmer. During the session, the Brazilian bond due 2040 added 0.05 to 130 bid, 130.05 offered.

Colombia weak on buyback

Elsewhere, Colombia saw the long end of its yield curve post losses as it completed an oversubscribed tender offer, repurchasing $500 million of its bonds with maturities ranging from 2020 to 2033 on Friday.

In trading, the Colombia bond due 2020 gave up 0.25 to 140.50 bid, 141.50 offered while the bond due 2033 eased one point to 136 bid, 137 offered.

And Ecuador continued its reign as the market underperformer, as election jitters continue to trigger losses. The trader added that lower oil prices did not help.

During the session, the Ecuadorian bond due 2015 shed 0.75 to 100.25 bid, 101 offered.

Venezuela also fell on declining commodity prices. During the session, the Venezuelan bond due 2027 gave up 0.30 to 122.40 bid, 122.70 offered.

Elsewhere, the Russian bond due 2030 gained 0.07 to 111.125 bid, 111.25 offered.

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