Market rallies on Greece progress, but Asian bonds stay ‘defensive’; EM roadshows ahead

By Christine Van Dusen

Atlanta, June 22 – Many emerging markets bonds were quiet on Monday morning, with unchanged spreads, before Europe’s markets opened on strong footing amid hopes that the situation in Greece would be solved soon.

Investors are “complacent about the risk of contagion spreading from Greece to global markets” because “Greece is small and buffers are now in place to limit contagion,” according to a survey from Barclays Research.

On Monday, Greece and its creditors seemed to be a step closer to agreeing on a debt management plan that would help the sovereign avoid bankruptcy.

“Most investors view the sell-off in core bond markets as a positive development with limited follow-through,” the report said. “For most credit investors, the move higher in government yields has made both investment-grade and high-yield credit more attractive.”

Still, the tone for investment-grade bonds from Asia was “very defensive, with sellers into the rally,” a London-based trader said.

“Most of the buying interest we saw was out of Europe while Asia was skewed to slightly better selling,” he said.

Cnooc Ltd.’s 2025 traded up at 155 basis points before settling closer to 153 bps he said.

“Banks were mixed,” he said. “Korea closed unchanged, India unchanged as well. But the tone is improving, with buyers and a bit of short-covering.”

In deal-related news, several issuers were on or planning roadshows, including China Life Insurance Co. Ltd., Mongolia, China’s Tianjin Binhai New Area Construction & Investment Group Co. Ltd. and Kazakhstan. And market sources were whispering about a possible issue of dollar-denominated notes from State Bank of India, as well as a roadshow from the Kurdistan Regional Government.

Lifestyle sees little trading

The new issue of notes from China’s Lifestyle International Holdings Ltd. – $300 million 4½% notes due 2025 that priced Friday at 99.071 to yield Treasuries plus 230 bps – traded at 230 bps bid, 225 bps offered for much of Monday, a trader said.

“Very little trading,” he said.

The bonds were issued by subsidiary LS Finance (2025) Ltd. and guaranteed by Lifestyle International. BofA Merrill Lynch and JPMorgan were the joint lead managers and joint bookrunners for the offering.

Proceeds will be used to repay bank financing, to fund capital expenditures relating to store renovation and new department store projects in the future and for general corporate purposes.

Pacific Rubiales in focus

Latin America-based Pacific Rubiales was quiet for most of the day, until some auction prints in the afternoon, a New York-based trader said.

The company is in the middle of a proxy battle, pitting some bondholders against Mexico’s Alfa SAB de CV and Harbour Energy Ltd, which want to buy Pacific Rubiales.

Bids improved for the target company on Monday, he said.

Meanwhile, low-beta spreads for Latin America were slightly wider on the day, he said, amid good two-way flows and better selling later in the day.

China insurer on roadshow

China Life Insurance is on a roadshow for an issue of dollar-denominated tier 2 subordinated notes, a market source said.

BNP Paribas, Citigroup and HSBC are the joint global coordinators for the Regulation S deal. BofA Merrill Lynch, CICC Hong Kong and Goldman Sachs are other bookrunners.

The issuer is based in Beijing.

Investor meetings for Mongolia

Mongolia is on a roadshow for an issue of renminbi-denominated bonds with bookrunners Citic CLSA Securities, HSBC, ING, TDB Capital, Ulaanbaatar Capital and China Citic Bank, a market source said.

The roadshow is being held in Singapore and Hong Kong.

Another roadshow planned

China’s Tianjin Binhai New Area Construction & Investment Group will commence a roadshow on Tuesday for a dollar-denominated issue of notes, a market source said.

DBS Bank, Bank of China, HSBC, Standard Chartered Bank and Shanghai Pudong Development Bank are the joint global coordinators, joint bookrunners and joint lead managers. ICBC, China Construction Bank and Wing Lung Bank are joint bookrunners and joint lead managers for the Regulation S deal.

The Tianjin-based company offers engineering and construction services.

Kazakhstan eyes offering

Kazakhstan will set out on Wednesday for a roadshow to market a possible issue of dollar-denominated notes, a market source said.

Citigroup and JPMorgan are the bookrunners for the Rule 144A and Regulation S deal. Kazkommertz Securities and Halyk Finance are other joint lead managers.

Gazprom plans renminbi bonds

Russia’s OJSC Gazprom is looking to issue $500 million worth of renminbi-denominated bonds, a market source said.

Other details were not immediately available on Monday.

Gazprom is a Moscow-based natural gas producer.

Baidu seeks issuance

China’s Baidu Inc. is looking to issue dollar-denominated notes with bookrunners Goldman Sachs and JPMorgan Securities, according to a company press release.

The proceeds from the Securities and Exchange Commission-registered deal will be used for general corporate purposes.

Baidu is a Chinese-language Internet search provider based in Beijing.

Kurdistan could print notes

Kurdistan will meet with international fixed-income investors “with a view to a potential transaction in the near future,” according to an announcement from the sovereign.

Deutsche Bank and Goldman Sachs are the bookrunners for the deal.

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