Turkey, Russia CDS tighten; risk appetite grows, but flows limited; Asian issuers on tap

By Christine Van Dusen

Atlanta, Oct. 14 – Cash spreads for emerging markets bonds opened on Tuesday mostly unchanged as investor sentiment improved and the asset class kept up with U.S. Treasuries.

But flows were limited following Monday’s Columbus Day holiday in the United States.

Credit default swaps for Turkey and Russia tightened by 2 basis points in the morning, a London-based analyst said.

“The tone in Russia yesterday benefitted from the positive political developments over the weekend,” he said, pointing to the artillery silence period and the removal of Russian troops from the border with Ukraine.

“But again, overnight, we have seen reports of fighting at Donetsk Airport and in Luhansk,” he said.

In other news from Russia, OAO Gazprom reported an increase in second-quarter earnings.

“Given the macro and political environment in Russia and negotiations with Ukraine, we do not expect much spread reaction to these second-quarter results, with fundamentals taking a backseat for now,” the analyst said. “Although there have been positive developments in the Ukraine conflict in recent days, the outlook remains uncertain, so we are neutral on Gazprom.”

Looking to Latin America, corporate bonds showed little reaction to the market and volumes were light, a New York-based trader said.

Buying slightly outpaced selling, though the mix was mostly even, he said, and high-grade names from Brazil were just a touch stronger.

Meanwhile, bonds from Colombia remained volatile amid strong liquidity, he said, and Mexico’s Cemex SAB de CV struggled.

In deal-related news, three Asian issuers – Korean Reinsurance Co. Ltd., Power Construction Corp. of China and China’s Yunnan Energy Investment (Overseas) Co. Ltd. – set talk for upcoming deals.

Korean Reinsurance sets talk

Korean Reinsurance set talk in the 4.65% area for its upcoming issue of $200 million notes due in 30 years, a market source said.

HSBC and JPMorgan are the bookrunners for the Regulation S deal.

The notes are non-callable for five years.

The issuer is based in Seoul, South Korea.

Chinese corporate guidance

China’s Power Construction set talk in the 4.1% area for a $500 million offering of perpetual notes, a market source said.

HSBC, Standard Chartered Bank, Bank of Communications Hong Kong, Bank of China and CCB International are the bookrunners for the Regulation S deal.

The notes will be non-callable for five years.

The issuer is a Beijing-based contracting, investment and real estate development company.

Talk from Yunnan Energy

China’s Yunnan Energy set talk at 5½% to 5.6% for its upcoming issue of renminbi-denominated and benchmark-sized notes due in three years, a market source said.

Guotai Junan International is the global coordinator, joint lead manager and joint bookrunner. ABC and Huatai Financial are the joint lead managers and joint bookrunners.

The proceeds will be used for potential future acquisitions and investments, as well as for working capital and general corporate purposes.

The issuer is a subsidiary of Yunnan Provincial Energy Investment Group Co. Ltd., a Kumming-based developer of wind projects.

Croatia seeks issuance

Croatia is looking to issue international bonds in early 2015, a market source said.

No other details were immediately available on Tuesday.

City Developments book

The final book for Singapore-based City Developments Ltd.’s new S$40 million 3.78% notes due Oct. 21, 2024 was more than S$250 million from 23 accounts, a market source said.

The tap priced on Monday at par to yield 3.78% via OCBC.

About 98% of the orders came from Singapore and 2% from Malaysia, with 49% from insurers, 35% from fund managers, 10% from private banks and 6% from banks and corporates.

City Developments is a property developer and owner.

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