Banco do Brasil does deal; spreads tighten on 'solid' session; Argentina, Venezuela outperform

By Christine Van Dusen

Atlanta, July 18 - Brazil's Banco do Brasil SA priced notes on Thursday as spreads tightened amid thin volumes and some selling of emerging markets bonds.

"Fairly solid session, despite the afternoon sell-off in the 10-year," a London-based trader said. "Some names are amazingly strong and closing nicely tighter on the day."

The Markit iTraxx SovX CEEME ex-EU index spread on Thursday narrowed to 215 basis points over Treasuries from Wednesday's level of Treasuries plus 223 bps. The Markit iTraxx Crossover index spread - seen Wednesday at 425 bps - tightened to 412 bps over Treasuries.

"The focus now is how stable rates will remain," a London-based analyst said. "With many investors in a defensive mood with elevated cash balances and low inventory, they will likely be tempted to go long duration to make up for any underperformance."

Meanwhile, Latin American sovereign bonds traded higher and tighter on Thursday morning, a New York-based trader said.

Argentina and Venezuela led the way, with Argentine bonds up as much as 1½ points early in the session.

"Venezuela bonds are up ¾ to 1¾ points for the 2027s in the 85¼ area," he said. "[Petroleos de Venezuela SA] 2017s trade at 93.85 as hopes are that the supply concerns that appeared in the market last week were overdone."

By the close on Thursday, Venezuela's 2027s had hit a high of 87 before ending the day at 851/2.

"Higher-rated credits continue the positive trend of the last few days, tightening 4 bps to 8 bps," the New York trader said. "Some selling appeared to meet recent buying."

Banco do Brasil sells bonds

In its new deal, Banco do Brasil priced €700 million 3¾% notes due 2018 at 99.442 to yield 3 7/8%, or mid-swaps plus 283.9 bps following talk in the 4% area.

BB Securities, Bradesco BBI, Deutsche Bank, HSBC, JPMorgan and Santander were the bookrunners for the deal.

And OJSC Russian Agricultural Bank launched an $800 million issue of notes due in 2018 at 5.1% after initial talk in the 5.4% area, a market source said.

JPMorgan, RBS and VTB are the bookrunners for the Rule 144A and Regulation S deal.

Multipolar sets talk

Also on Thursday, Indonesia-based computer importer and retailer PT Multipolar Tbk set final talk at 9¾% for its $200 million issue of five-year notes with Citigroup, Deutsche Bank and Nomura Securities in a Regulation S deal.

"We are waiting for more issuance to come out," the analyst said. "If [OJSC Gazprom]'s €900 million deal is anything to go by, these new deals will be highly popular," the analyst said.

The 3.7% notes due 2018 priced at par to yield 3.7% via BofA Merrill Lynch, Deutsche Bank, Gazprombank and JPMorgan in a Regulation S deal.

"It's currently trading at 1003/4," she said.

Ukraine notes rally

Ukraine bonds continued their rally on the back of Bernanke's speech, said Svitlana Rusakova of Dragon Capital.

"Corporates remained in demand and suddenly it turned out that there was not so much paper on offer," she said. "The 2018 issues all rose a ½ point to 1 point on top of their good performance in the last few days."

Middle East in focus

In trading from the Middle East, Emaar Properties' 2019s were 45 bps tighter on the month, a trader said.

"Having traded as low as 104 in late June, they're now at 107½ bid, 108½ offered," he said.

Abu Dhabi's five-year notes were trading Thursday at 66 while Dubai's were seen at 220.

"It's pretty thin out there at the moment - a real summer and Ramadan feel, and the depth of liquidity is poor," he said. "Skewed to the sellers."

ADIB's perpetuals trade up

The recent perpetual notes from Abu Dhabi Islamic Bank, which priced at par, were seen Thursday at 102½ bid, 103 offered, the London trader said.

Dubai Islamic Bank's perpetuals, which also priced at par, moved to 99 bid, 99¾ offered on Thursday.

"The Abu Dhabi Commercial Bank 2023 trade seems to have gained some traction this week with some accounts seeing the lagging 3 1/8% as good value versus the rich 4½%," a trader said.

And Kuwait-based Kipco's 2020s were being left behind, a trader said.

"Moody's downgraded the ratings of 12 Gulf region banks," he said. "We saw better buyers most of the session. Solid spread moves."

Buyers for Eskom

South Africa's Eskom Holdings saw only buyers on Thursday, with its 2021s closing 50 bps tighter, the London-based trader said.

In other trading from Africa, many sovereign names were well supported on Thursday, he said.

He pointed to Ghana and Angola, in particular.

"Nigeria continues to have strong support, with the 2018s now 55 bps better on the week," he said.

KDB oversubscribed

The final book for Korea Development Bank's €200 million tap of its 1½% notes due May 2018 was more than €300 million from about 40 investors, a market source said.

The notes priced at 98.799 to yield mid-swaps plus 70 bps with Barclays, Credit Agricole, DZ Bank and KDB Asia in a Regulation S deal.

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