Tajikistan to roadshow debut dollar deal; EM prices hold in amid geopolitical volatility

By Paul A. Harris

Portland, Ore., Aug. 29 – Emerging markets debt prices were stable, spreads slightly wider and the market a little softer against a backdrop of increased geopolitical volatility and an ensuing selloff in stock markets around the globe, a London-based bond trader said on Tuesday.

Investors are focused on news that North Korea fired a ballistic missile over the Japanese island of Hokkaido, early Tuesday Korean time, sending the United Nations Security Council into emergency session.

Also, political tension between Russia and United States ratcheted higher as Russia’s foreign ministry condemned unilateral sanctions leveled by the United States against Russia’s ally, Venezuela, which the Russian ministry characterized as a cynical desire to boost political tensions in Venezuela and further destabilize the country, possibly laying the groundwork for military intervention.

Gazprom OJSC (Gaz Capital SA) 4.95% loan participation notes due March 2027 had a dollar price of 101˝ bid, trading at a 275 basis points spread to mid-swaps on Tuesday, slightly wider on the day, the trader said.

The spread on the Gazprom 2027 paper has widened 25 bps during August, but much of that widening can be chalked up to contraction in the underlying benchmark, the source added.

Elsewhere, PDVSA’s bonds tumbled further on Tuesday on the expectation that oil receivables – money owed to the Venezuelan state-owned energy company from U.S. customers – might be seized by U.S. courts, according to a market source.

The PDVSA 5 3/8% notes due 2027 traded below 30 on Tuesday before rebounding to 31 on reports that China, Russian and possibly India may come to the aid of Venezuela in the face of U.S. sanctions, the source said.

Meanwhile, thin liquidity, which is expected to linger into the end of August, and a “risk-off” stance taking hold among investors, are impairing new issue activity.

The primary market is expected to remain dormant until September, a trader said.

Tajikistan debut

Republic of Tajikistan (B3/B-) is expected to begin an investor roadshow for its debut dollar-denominated eurobond later this week, according to an informed source.

Citigroup and Raiffeisen Bank International are leading the effort.

The structure of the deal, and subsequent timing remain to be determined, the source said.

Proceeds will be used in the construction of the Rogun dam, a 3,600 megawatt hydroelectric project that will impound Tajikistan’s Vakhsh River.

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