Poland, Turkey price bonds in firm, slightly wider session for EM; African bonds in demand

By Christine Van Dusen

Atlanta, Jan. 8 - Poland and Turkey sold notes on a solid Tuesday for emerging markets assets as investors clamored for long-duration bonds.

"Firm tone again," a trader said. "No real surprises here. Very decent moves on higher-yielding and longer-dated paper with duration. Obvious laggards are shorter-dated bonds, those pulling to par or more 'boring' bonds, for lack of a better word. Definitely some lower-beta paper is closing a touch wider on the day."

The Markit iTraxx SovX index spread opened 1 basis point wider while the corporate index was wider by 3 bps.

"This morning we are marking down VTB, Sberbank, Rosneft, Novatek curves," a London-based analyst said. "Low-yielders have paused in spread terms after their strong recent run."

Against this backdrop, Dubai Electricity and Water Authority (DEWA), Thai Oil Public Co. Ltd., the City of Prague, China's CSI Properties Ltd. and China's Hainan Airlines Co. Ltd. took steps toward bringing new deals to the market.

In trading, money chased bonds from Africa, with Gabon and Nigeria tricky to short.

Ghana closed at 118¼ mid, Angola at 114 mid and Zambia with a 102 handle on the bid side.

"Egypt has ticked along without tremendous Street liquidity," a trader said.

In its new deal, Poland priced a €1 billion issue of 1 5/8% notes due Jan. 15, 2019 at 99.547 to yield 1.705%, or mid-swaps plus 65 bps, at the tight end of talk.

BNP Paribas, Deutsche Bank, HSBC and Unicredit were the bookrunners for the Regulation S deal.

And Turkey priced a $1.5 billion issue of 3¼% notes due March 23, 2023 at 98.093 to yield 3.473%, or mid-swaps plus 155 bps via BNP Paribas, Deutsche Bank Securities and Goldman Sachs International in a Securities and Exchange Commission-registered deal.

The proceeds will be used for general financing purposes, which may include the repayment of debt, according to an SEC filing.

DEWA plans $1 billion deal

In deal-related news, Dubai's DEWA is planning a sukuk issue of about $1 billion for the first quarter of the year, a market source said.

The proceeds will be used to refinance debt and invest in company projects.

And Thai Oil has mandated Barclays, HSBC and Standard Chartered Bank for a roadshow starting Thursday.

A dollar-denominated issue of Rule 144A and Regulation S notes may follow.

Prague mandates bookrunners

Also on Tuesday, the City of Prague mandated CSOB and UniCredit Bank Czech Republic for a €200 million issue of notes, a market source said.

The proceeds will be used to repay debt and invest in infrastructure projects, such as roads and transportation.

And China-based real estate company CSI Properties has given initial price guidance in the 6½% area for a dollar-denominated issue of five-year notes, a market source said.

Bank of America Merrill Lynch and JPMorgan are the bookrunners for the Regulation S deal.

The notes are expected to price this week.

Hainan Airlines plans notes

China's Hainan Airlines is planning a $500 million issue of seven-year notes, a market source said.

No other details were immediately available on Tuesday.

Overall, the primary market was mostly quiet during the session.

"So the beat goes on," a London-based trader said. "Anything higher-yielding is well sought after and very technical."

He was referring, in particular, to notes from Bahrain, Kuwait and Dubai.

"Lower-beta may have reached some sort of near-term spread level, but there still plenty of bonds that are very difficult to replace," he said. "Liquidity remains poor on Kipco and Burgan Bank."

Qatar notes trade up

Qatar's 2018s moved up above 101 after a recent lag while Majid al-Futtaim Holdings' notes were well bid. Emaar Properties' 2019s were higher at 110½ bid, 110.11 offered and buyers were seen for Saudi Electricity Co. (SECO).

"SECO is doing well," he said. "The 2022s were heavy towards the back end of last year but go out 25 bps better on the week, last printing at the 108.55 bid, 108.60 offered level."

ADIB still popular

The recent perpetual notes from Abu Dhabi Islamic Bank remained popular on Tuesday, trading at 107¼ bid, 108 offered.

"Balanced flow so far, but the Street is still chasing plenty of bonds," the London trader said.

Dubai-based DPWorld's 2017s were trading at a high of 113 while Qatar-based Qtel International's 2023s were holding at Treasuries plus 135 bps on the bid side.

"Most names from Dubai saw only buyers, really," he said. "Government paper was quieter."

Abu Dhabi National Energy Co. (TAQA) saw its 2023s trade at Treasuries plus 138 bps on the bid side. And Emirates Airline's 2016s closed 45 bps tighter on the week.

And notes from Lebanon "look a little interesting at these levels versus their peers," he said.

Ukraine outperforms

From Ukraine, sovereign eurobonds have been outperforming so far this week, with the 2017s reaching a new high of 111 bid, 112 offered, said Svitlana Rusakova of Dragon Capital.

Ukraine's 2020s climbed to 105¼ bid, 106¼ offered while the 2021s moved up to 102¼ bid, 103¼ offered.

"Quasi-sovereign Naftogaz changed hands at 104¼ bid, 105¼ offered," she said. "Corporates remained very strong and we saw continued push into higher-yielding names."

The City of Kiev's 2015s rose to 94½ bid, 96½ offered while the 2016s traded up at 95½ bid, 97½ offered.

Mexico prints notes

On Monday, Mexico priced a $1.5 billion increase of its 4¾% notes due March 8, 2044 at 109.615 to yield 4.194%, according to a filing with the Securities and Exchange Commission.

Barclays and JPMorgan Securities LLC were the bookrunners for the SEC-registered notes.

The notes will be consolidated to form a single series with the sovereign's outstanding $2.96 billion 4¾% notes due 2044.

Sun Hung Kai oversubscribed

The final book for the recent $500 million issue of 3 5/8% notes due 2023 from China-based holding company Sun Hung Kai Properties Capital Market Ltd. was $4.5 billion with 270 accounts, a market source said.

About 80% of the orders came from Asia and 20% from Europe. Fund managers picked up 51%, insurers 18%, banks 11%, public sector 10%, private banks 8% and corporates and others 2%.

The deal priced at 99.386 to yield 3.699%, or Treasuries plus 162.5 bps via Deutsche Bank, HSBC and Standard Chartered Bank in a Regulation S-only deal.

Accounts pick up Shimao

Also oversubscribed was China-based Shimao Property Holdings Ltd.'s recent $800 million issue of 6 5/8% notes due 2020, which priced at par.

HSBC, Standard Chartered Bank, UBS, Goldman Sachs and JPMorgan were the bookrunners for the Regulation S deal.

The final book was more than $17.5 billion from more than 400 accounts, with 81% from Asia and 19% from Europe.

Fund managers accounted for 58%, private banks 33%, banks 6%, insurers 2% and corporates 1%.

The proceeds will be used to refinance the company's outstanding debt and fund existing and new projects, as well as for general corporate purposes, according to a report from Moody's Investors Service.

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