Primary sees deals from Asia, Mideast; EM funds take in $247 million; EMBI seen 8 bps tighter

By Paul A. Harris

St. Louis, Sept. 3 - Cash bonds in the emerging markets were little changed on a quiet Thursday ahead of the three-day Labor Day weekend, which begins after Friday's close.

The EMBI Global Diversified index closed at 391 basis points bid, 8 bps tighter on the day.

Meanwhile cash continues to flow into emerging markets bonds.

The dedicated EM bond funds saw $247.1 million of inflows for the week that ended Wednesday, according to Brad Durham, managing director for EPFR Global. It follows the previous week's $303.2 million inflow.

The latest infusion of cash, for the week to Sept. 2, represents the 21st consecutive week of net inflows, EPFR's Durham added.

Meanwhile there was action in the primary market as three quasi-sovereign deals - two from Asia and one from the Mideast - were priced.

NBAD prices $850 million

The National Bank of Abu Dhabi priced $850 million of 4½% five-year senior unsecured notes (Aa3/A+/AA-) at a 228 bps spread to Treasuries.

The notes came at a reoffer price of 99.717 to yield 4.564%.

Barclays Capital, BNP Paribas, National Bank of Abu Dhabi and RBS AG led the Regulation S deal.

Korea National Housing prices $750 million

Meanwhile in Asia, Korea National Housing Corp. priced $750 million of five-year notes (A2/A) to yield Treasuries plus 265 bps.

The price talk was Treasuries plus 275 bps.

Bank of America Merrill Lynch, Citigroup, Goldman Sachs & Co., Morgan Stanley, Samsung Securities and UBS AG led the Regulation S deal.

Proceeds will be used for general corporate purposes.

At Thursday's New York close, the new Korea National Housing five-year paper was quoted at 260 bps bid, 255 bps offered, versus the 265 bps spread at pricing, a trader said.

"Asia was a little on the light side, today, ahead of the long weekend," added the trader.

"Cash remained pretty well bid and outperformed CDS, on average."

PSA sells $500 million

Also from Asia, Singapore's PSA International priced a $500 million issue of 4 5/8% 10-year notes at a 140 bps spread to Treasuries on Thursday.

The notes came at an issue price of 99.1.

Deutsche Bank Securities, JPMorgan and Nomura Securities were the bookrunners.

Stability in LatAm sector

The Latin American markets have been notably stable, of late, according to an emerging markets investor who focuses on the sector.

"The non-dollar markets, which had some negative moves over the last three days, are a little better today," the investor said. "Most of the emerging currencies are recovering.

"However bond prices are not really moving that much."

Brazil's 11% bonds due in 2040 were 132 bid, 132¼ offered, up ½ point on Thursday, the investor said.

Those highly liquid bonds were 130 bid in mid-August, the source remarked, pointing out the relative stability indicated by that tight trading range.

Brazil bonds in short supply

On Wednesday Enrique Alvarez, head of research, Latin America, for IDEAglobal, told Prospect News that Brazil could come with a new debt offering in the fall - somewhere farther out on the maturity curve than 10 years, but likely not much more than 15 years.

The emerging markets investor who spoke Thursday had no trouble believing it.

"I wouldn't be surprised," the buysider said. "There is not enough Brazil paper around."

Brazil has about $45 billion of external debt, the investor said, and added that the amount is low relative to the amount of money that is invested in the asset class.

"If you have Brazil, you usually don't sell it because you know that prices are not gong to go down that much," the investor said.

"Also the government has been buying back some of the short-term debt.

"So the technical picture for Brazil is pretty positive."

It is entirely possible that reverse inquiry could draw Brazil back into the market, the investor said.

After all, it was reverse inquiry that drove Brazil to do a $500 million tap of its 7 1/8% global bonds due 2037 earlier in the year, the buysider said.

"We heard half of that was taken by just one account," the source added.

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