Russian bonds still tightening; Dial taps banks; trading better for all Lat-Am but Argentina

By Christine Van Dusen

Atlanta, Aug. 14 – Corporate bonds from Russia started Thursday’s session tighter again, even amid reports that the sovereign’s aid convoy is heading toward a rebel-controlled area of the border with Ukraine.

“The convoy is unlikely to reach Ukraine before tomorrow, still providing time for a deal to potentially be reached,” a London-based analyst said.

Also from Russia, Moscow-based oil company OAO Rosneft asked the government for more than $40 billion to help manage sanctions.

“Reports suggest the National Wealth Fund would buy Rosneft bonds which, if true, will alleviate concerns about Rosneft’s circa-$42 billion of debt maturing before 2018,” the analyst said.

Still, Rosneft’s bonds were mostly unchanged on Thursday morning.

Moscow-based fertilizer company EuroChem Global Investments Ltd. reported that second-quarter revenue climbed 3%, year-over-year, while earnings declined by 11%.

The company blamed the conflict in Ukraine, as well as disruptions of supply to North Africa and the Caribbean.

In response, EuroChem’s 2017s have continued to underperform, widening 162 basis points on the month, a market source said.

That’s in line with Rosneft’s 2017s, he said, but underperforms potash producer Uralkali’s 2017s.

In deal-related news, market sources were whispering about a possible issue of tier II notes from Turkey’s Turkiye Vakiflar Bankasi TAO (Vakifbank), which could come to the market after September.

Looking to Latin America, spreads for low-beta bonds were mostly unchanged, a New York-based trader said.

Dollar prices moved higher, along with U.S. Treasuries, with longer-dated notes climbing as much as 75 cents.

And bonds from the Middle East were “fairly active” on Thursday, a London-based trader said.

Venezuela, PDVSA, Brazil rise

Venezuela saw its notes tick up between 15 cents and 50 cents on Thursday morning while Petroleos de Venezuela SA’s (PDVSA) notes due in 2026 traded up at 59.35 on good two-way flows, the New York trader said.

PDVSA’s 2024s, meanwhile, moved to 62½ from 62.10, he said.

Brazil’s 2045s closed at 97¼ after trading on Wednesday at 95¾, he said, and Mexico’s 2044s traded at 102½ after Wednesday’s level of 100¾.

Argentina bonds suffer

Argentina continued to take a beating in the market, as investors began to lose hope that banks in the United States might assist in reaching a solution with bond holdouts.

The sovereign’s Bonar 2024s dropped to 86¼ from 89 and the Boden 2015s moved to 95 from 96 during the previous session, the New York trader said.

But flows were generally better, and buyers emerged for Argentina paper, he said.

Dubai Holdings catches up

From the Middle East, long-dated bonds caught a bid and investment-grade notes due in seven to 10 years were “pretty popular,” the London trader said.

“A few laggards have been playing catch up,” he said. “The Dubai Holdings 2017 sterling notes caught up today, and the Bahraini and Kuwaiti complex continues its recovery program.”

Banking bonds from the Gulf region were well supported, especially Abu Dhabi Commercial Bank’s 4½% notes.

TAQA sees two-way

Abu Dhabi National Energy Co. (TAQA) “turned a little more two-way today, especially the 2018s through 2024s,” the London trader said. “The company, post-solid results, said they were not going to tap markets again until 2017. That’s clearly positive for the existing curve.”

Bonds from Dubai were also popular on Thursday, he said.

“Time to start looking to a September or October issue, with the curve this well-supported,” He said. “Seen ongoing demand for the 2023s and 2029s all week, really.”

India’s Dial picks banks

In deal-related news, India’s Delhi International Airport (Dial) has mandated Citigroup, HSBC, JPMorgan and Standard Chartered Bank as bookrunners for its upcoming issue of $300 million notes due in five years, a market source said.

No other details were immediately available on Thursday.

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