Emerging markets stay quiet, firm amid 'truckload of supply'; tone better; two roadshows start

By Christine Van Dusen

Atlanta, Nov. 6 - Emerging markets continued to be quiet Friday but remained firm even as mutual fund inflows slowed. Investors continued to sort through all the new issuance of the last month or so, market sources said.

"It's been kind of a sleeper the last two days," a New York-based market source said. "There's not a ton of news to report. Investors are still reacting to what's already out there."

This current climate of quiet can be characterized as something of a "little hiatus right now," a trader said. "There's been a truckload of supply, so the market's just kind of digesting it."

Some of the wait-and-see attitude may stem from this weekend's planned G20 Finance Ministers and Bank Governors Meeting in Scotland, where leaders will look at ways to keep economic supports in place and keep the global economic crisis from occurring again.

"There will be a very large push towards trying to identify the sense of the global asset bubble and how to deal with that," said Enrique Alvarez, a debt strategist with think tank IDEAglobal. "Anything may come of that."

Tone improves

Overall, the tone of trading on Friday was "much better," the trader said, pointing to PT Bumi Resources TBK's $300 million of 12% notes that priced Thursday at par to yield 3.055%.

"That traded at 99¾ and 99 7/8 overnight and is back above par today," the source said. "And going out, it was par plus ¼ and par plus 5/8. That seems to have calmed things down a bit."

The $300 million of 8¾% bonds from Cairo's African Export-Import Bank (Afrexim Bank) that priced Thursday at 98.521 to yield 9 1/8% also traded well on Friday, according to another market source.

"The best performer was Afrexim Bank, trading roughly 2% higher than the issue price," according to a trader based in Europe.

New roadshows

Also on Thursday, Russia was said to be roadshowing in London a planned 2010 offering of $17.8 billion global bonds. And market sources whispered that Ciliandra Perkasa Finance, a Singapore-based subsidiary of palm oil production company PT Ciliandra Perkasa in Jakarta, Indonesia, is working on a non-deal roadshow.

CDS mixed

Five-year credit default swaps were mixed on Friday, with most sovereigns widening, after a Thursday when tightening was prevalent at the European close.

Brazil's five-year CDS closed Friday at 133.36 bps mid, 0.69 bps wider, and Russia closed at 188.85 bps, 0.045 bps wider. Mexico ended the day at 163.66 bps, 0.825 bps wider.

Two sovereigns tightened: Argentina's five-year CDS closed Friday at 1,049.06 bps mid, 5.765 bps tighter, and Venezuela closed at 1,115.855 bps, 4.99 bps tighter.

Argentina is "in a simmering phase," Alvarez said. "The market's pulled back a bit."

He also pointed to Panama as "highly volatile lately."

Peru gains

Peru, on the other hand, was an outperformer for Friday, "up 0.54%," he said. "That has to do with the new gas reserve found by Petrobras in the Peruvian jungle yesterday."

That news came on the heels of Rio de Janeiro-based Petrobras' recent pricing of a benchmark-sized, two-part offering of $2.5 billion of 5.75% notes due January 2020 to yield 5.875% and $1.5 billion of 6.875% notes due January 2040 to yield 7 %.

Among the corporate five-year credit default swaps, OAO Gazprom closed at 254.15 bps, 4.77 bps wider, while Russia's VTB Bank closed at 347.745 bps, 1.64 bps tighter.

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