Greece, Goldman chill primary; Asian Development Bank prices; KazMunaiGas deal whispered

By Christine Van Dusen

Atlanta, April 27 - Emerging markets were hectic in the secondary but quiet in the primary on Tuesday as the problems of debt-saddled Greece began to infect other sovereigns and market-watchers kept tabs on the Senate hearing for Goldman Sachs, market sources said.

"It's been non-stop all day," a London-based trader said. "What have I seen? What haven't I seen? It's been the busiest, most volatile day for a long time."

The European morning session was "as bad as I've seen in a long time," he said. "Spreads are wider by a lot - CDS are 10 basis points wider."

That early day volatility was chalked up to investor concern that the bailout package for debt-saddled Greece wouldn't come through and the sovereign would default on some of its debt, which totals about €300 billion. Also hurting Greece was Standard & Poor's downgrade of its credit rating to junk status and worries that the sovereign's troubles would spread to other countries.

"It's all contagion from Greece," the trader said. "It essentially started with Greece, then Spain, then Portugal, then Ireland, then Italy, then every other asset class as well."

Portugal was trading at "330, and Egypt was trading at 190," he said. "That makes emerging markets look very expensive."

By afternoon, though, the situation had calmed a bit as market-watchers took a break and turned their attention to the Senate Permanent Subcommittee on Investigations' hearings with Goldman Sachs executives on allegations that the investment bank misrepresented information about collateralized debt obligations connected to subprime mortgages.

"It all seems to have calmed down," the London trader said at mid-afternoon in Europe. "The market's coming back. We're off the wides of the day."

Argentina watches Greece

Still, Greece remained a concern, in particular for Argentina. The country took one more step toward launching its debt-swap offer with news on Tuesday of approval from Italian securities regulator Consob. But at the same time, some market-watchers wondered whether Greece could infect Argentina and impact the percentage of bondholders who participate in the swap.

"I think Argentina is still in the window of opportunity if nothing major comes about with Greece," said Enrique Alvarez, debt strategist with think tank IDEAglobal. "I think it should still be OK and should be able to launch. And the acceptance ratio of the swap should still be acceptable."

The reason: "People will be scared," he said. "The eurozone shakeout will affect overall confidence and will push them into the exchange."

Meanwhile, some other sovereigns in Latin America were under pressure. "Venezuela is going to be subject to some pressure under these circumstances," Alvarez said. "The one that's too tight, with a lower credit rating that has been consistently outperforming but should pull back, is Uruguay. It's trading very tight."

Primary mostly quiet

On the primary side on Tuesday, activity was muted due to the Greece situation and the market's focus on Goldman Sachs.

"I don't think you can talk about new issues. They're on the backburner," Alvarez said. "There is a contagion effect, and when there is a contagion effect you cannot talk of issuing new paper. It's that simple and straightforward."

He expects issuers will put deals on pause for a few days at least. However, "we do have a cross-current at hand," he said. "On a yield basis the Treasury market is going lower in yields because of a flight to safety, but on a spread level they're going wider.

"It depends on the balance, as far as issuance. If the widening is compensated by lower yields, they may have a chance to try to get their feet wet in the issuance market. But the confidence factor is not strong enough to make any sort of new bond float essentially a success."

ADB prices add-on notes

Philippines' Asian Development Bank priced a A$400 million add-on of 6¼% notes due March 5, 2020 at 99.104 to yield 6.3725%, according to a company filing.

The notes will be consolidated to form a single series with the A$600 million 6¼% notes due March 5, 2020 that were issued on March 5.

Commonwealth Bank of Australia, RBC and Toronto-Dominion Bank were the bookrunners for the deal.

Proceeds will be used for capital resources and ordinary operations.

Asian Development Bank is an international development finance institution based in Manila.

Whispers on KazMunaiGas

Kazakhstan-based KazMunaiGas' planned five- and 10-year notes are both being whispered at Treasuries plus 275 bps, according to a market source.

Citi, Credit Suisse and RBS Securities are the bookrunners for the deal, which could come to market as soon as this week.

KazMunaiGas is a government-run energy firm based in Astana, Kazakhstan.

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