South Africa sets mandate for global bond offering; Chile debt steady following earthquake

By Paul A. Harris

St. Louis, March 1 - JPMorgan's Emerging Markets Global Diversified Bond Index tightened by 10 basis points on Monday to close at a 301 bps spread, according to a market source.

Meanwhile the sovereign debt of Chile held steady.

An 8.8 magnitude earthquake rocked the western South American republic over the weekend, causing death and widespread destruction, especially in Concepcion, Chile's second-largest city, according to press reports.

Against this tragic backdrop, however, the sovereign debt of Chile was holding in, according to Enrique Alvarez, head of Latin America fixed income research at IDEAglobal.

The EMBI Chilean sub-index gained 0.2% on the day, Alvarez said, adding that it closed at a spread of 135 bps.

Monday's session saw follow-through on a significant mark-up in LatAm debt, which began late last week, Alvarez said.

That mark-up got underway on Friday, he added, but noted that Friday's volume was very light.

"Today we saw a continuation of that mark-up," the IDEAglobal strategist said.

"Brazil, Colombia, Mexico, Panama and Peru have all been up," he said.

Positive cash flows to dedicated emerging markets bond funds, and a view that the U.S. Federal Reserve Bank will remain accommodative with respect to interest rates, are among the positive forces driving the rally in Latin American debt, Alvarez said.

CDS tighten

Earlier, during the afternoon of Europe's trading session, credit-default swaps were seen tighter, according to a European source.

Brazil's five-year CDS were 130 bps mid, 4 bps tighter.

Mexico's five-year CDS were 127 bps mid, 7 bps tighter.

Russia's five-year CDS were 177 bps mid, 10 bps tighter.

OAO Gazprom's five-year CDS were 251 bps mid, 13 bps tighter.

And Ukraine's five-year CDS were 898 bps mid, 80 bps tighter.

South Africa taps banks

The Republic of South Africa mandated Deutsche Bank Securities and Standard Bank to jointly manage its dollar-denominated global bond offering.

The offering is expected to price during the March 1 week, according to a market source, who added that pricing could come as early as Tuesday.

Nedbank Capital and Quartile Capital are co-managers.

Proceeds will be used for the general purposes of the national government.

Long-term foreign currency debt of South Africa is rated BBB+ by Fitch Ratings and Standard & Poor's and A3 by Moody's Investors Service.

Last August South Africa priced a $500 million add-on to its 6 7/8% senior fixed-rate global bonds due May 27, 2019 at 107.511 to yield 5.85%.

VTB languishes below issue

Elsewhere on Monday, the new JSC VTB Capital 6.465% loan participation notes due 2015 (Baa1/BBB/BBB) continued to languish below issue price, according to market sources in Europe and the United States.

The bonds, which priced last week at par in a $1.25 billion issue, were 99¾ bid, 99.90 offered on Monday.

Shortly after the European close a Zurich-based trader gave those levels, which were confirmed by a source on the U.S. East Coast, shortly after the close there.

Monday's price, on the bid-side, was slightly below the 99.80 bid, 99.90 offered seen Friday.

The deal was poorly priced, sources said.

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