Morning Commentary: EM bonds open weak; Asian credits widen; China Development Bank on tap

By Christine Van Dusen

Atlanta, Sept. 29 – Most emerging markets bonds remained weak on Tuesday morning, with Asian credits widening by as much as 15 basis points, even as the sell-off in stocks slowed somewhat.

Helping to keep things tumultuous for emerging markets assets: Bonds are feeling the effects of losses for Volkswagen, Glencore and Agricultural Bank of China.

Qatar, for one, is suffering as a result of Glencore's debt crisis and Volkwagen's scandal, losing about $12 billion from its sovereign wealth fund.

And “Saudi Arabia has withdrawn an estimated $50 billion to $70 billion from global asset managers in order to fund its deficits and reduce exposure to volatility in equity markets,” a London-based trader said.

Looking to Asia, sellers far outpaced buyers on Tuesday morning, with recent issues moving wider, another trader said.

“Commodity-related names were unloved,” he said, noting that China-based Cnooc Ltd.'s curve was as much as 18 bps wider.

India, meanwhile, saw its bonds move 20 bps wider, then recover a bit after the central bank unexpectedly cut rates by 50 bps.

Against this backdrop, some issuers still advanced deals. China Development Bank set initial talk for a dollar-denominated offering of five-year notes at Treasuries plus 110 bps to 120 bps, a market source said.

The issuer is also expected to print a euro-denominated tranche of notes.

Barclays, BNP Paribas, Bank of China, Deutsche Bank, HSBC, JPMorgan, Societe Generale and Standard Chartered are the bookrunners for the Regulation S deal.

And Ghana is expected to move forward this week with its $1 billion issue of amortizing bonds with an average maturity of 10 years in a deal that is partially guaranteed by the World Bank’s International Development Association.

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