Emerging markets climb; Argentina to retie with IMF; Slovenia taps banks for bond offering

By Aaron Hochman-Zimmerman

New York, Aug. 20 - Emerging markets were generally better on Thursday as credits remained hitched to the fate of equities.

Slovenia made a move in the primary by announcing mandates for an upcoming euro-denominated benchmark bond.

The news allowed some to believe that Slovenia would be the first sovereign back to the primary market.

Brazil and Romania have also been discussed as possible issuers in the near term.

In trading, Argentina's discount bonds due 2033 jumped 1 point as investors were encouraged by the government's willingness to reengage with the International Monetary Fund.

From the major markets, the S&P 500 ended above 1,000 again as volatility sank by 1.17 to close at 25.09, according to the VIX index. The index is a common measure of market volatility.

Early primary rumblings

Slovenia tapped HSBC, RBS, Societe Generale and UniCredit Banka Slovenija as joint bookrunners for a euro-denominated benchmark-sized bond offering (Aa2/AA/AA).

The transaction is scheduled for "the near future," a source said, and will be subject to market conditions.

Emerging Europe moves with equities

The secondary market in emerging Europe "turned around" on Thursday, a London-based trader said.

"Yesterday we were wider...today we're tighter across the board," he said, as the market generally narrowed by 10 basis points.

Credits improved as equities in the major markets recouped losses and investors felt once again "that adding risk wasn't such a bad idea," he said.

"We're just following equities," he said, although announcing that "sounds like a stuck record."

Still, "I haven't seen any credit-specific news," he said, but "there is a better underlying bid to our market."

Russia's OAO Severstal had been seen as an outperformer earlier in the week.

Severstal's bonds due 2014 added ¼ point on Thursday to 93 bid, 94 offered.

Meanwhile, the key sovereigns were also better.

Russia's bonds due 2030 were quoted higher by 7/8 point at 101 3/8 bid, 101½ offered.

Turkey's bonds also due 2030 added 1¼ points to 155¼ bid, 155½ offered.

Elsewhere, "Ukraine has been better bid," he said.

The Ukrainian bonds due 2016 were quoted at 81½ bid, 83½ offered.

Argy leads LatAm tighter

Latin America was nearly silent on Thursday, a syndicate official said.

Still, CDS ratcheted down significantly across the board, he said.

Argentina led the way as its five-year CDS narrowed by 75 bps as Buenos Aires readied to reopen talks with the IMF, finance minister Amado Boudou said, according to reports.

Fellow high-beta Venezuela tightened its five-year CDS by 10 bps.

Brazil and many of the less volatile credits averaged 3 bps to 4 bps tighter.

The 11% Brazilian government bonds due 2040 were unchanged at 131½ bid.

However, the 8.28% Argentine discount bonds due 2033 added 1 point to 60½ bid, and the 9¼% Venezuelan sovereigns due 2027 tacked on 1¼ points to 72 bid.

Among the corporates, it was still impossible to find a price for Mexico's Grupo Petrotemex SA de CV 9½% bonds.

However, the Petroleum Co. of Trinidad and Tobago 9¾% bonds, which priced at 99.217 on Aug. 11, were higher, the syndicate official said. The bonds were better by 7/8 point at 106 bid.

Asia slides sideways

Asia was mostly unchanged as trading volumes were cut to August drought levels.

In the Philippines, the central bank's monetary board left the overnight borrowing rate at 4% and the overnight lending rate at 6%, according to a statement from the bank.

Since December 2008, the bank has cut rates by 200 bps.

"The monetary board decision to maintain policy rates is based on its assessment that current monetary settings are appropriate and that inflation is expected to remain within target over the policy horizon," the statement said.

The statement added that policy decisions need time to have an effect on the market.

The peso was seen trading at 48.405 to the dollar.

The Philippine bonds due 2030 were quoted at 127¼ bid.

In Indonesia, the government announced that it will artificially hold inflation at 5% as per the 2010 budget, according to the Jakarta Post.

"If inflation soars higher than the stated assumption, some correctional methods will be implemented by the government to control inflation, including stabilizing prices through market operations and ensuring sufficient supplies of goods and food, and also allowing imports if required," finance minister Sri Mulyani said, in the report.

The rupiah was seen trading at 10,032.5 to the dollar.

The Indonesian sovereigns due 2019 gave back ¼ point to 132½ bid.

KNOC wins in Nigeria court

Separately, South Korea's national oil firm, Korea National Oil Corp., won a case against the government of Nigeria in Nigeria's high court.

The court ruled that the government illegally revoked KNOC's 2005 license to develop two offshore oil fields.

Still KNOC's bonds hardly moved on the news.

The 5 3/8% bonds due 2014 fell 0.05 point to 101.72 bid.

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