Spreads widen, liquidity worsens on Turkey protests, economic fears; Dubai Holding outperforms

By Christine Van Dusen

Atlanta, June 6 - Liquidity was poor and depth was thin for emerging markets assets on Thursday as continuing protests in Turkey, which have hurt the sovereign's retail sales and tourist activity, pushed spreads wider and kept investors cautious.

"It's terrible again," a New York-based trader said.

The Markit iTraxx SovX CEEME ex-EU index spread on Thursday widened 7 basis points to 218 bps over Treasuries while the Markit iTraxx Crossover index - sighted at 435 bps over Treasuries on Tuesday - moved to 447 bps on Thursday.

Sales at shopping malls, shops, restaurants and movie theaters in Turkey have fallen by more than 30% since the start of the anti-government protests, a London-based analyst said.

"The risk-off mood continues," the London analyst said. "The Turkey sovereign is 5 bps to 8 bps wider and Russian and Turkish corporates are getting hit."

Russian high-yield bonds headed 15 bps to 20 bps wider while high-grade names moved out 5 bps to 8 bps. Turkish corporates were 6 bps to 10 bps wider.

"The flow this morning is 80% to 90% bids wanted. Seen some accounts looking at extension trades, which makes sense, given the steepening, but we could also move steeper further," a London-based trader said. "The market is very defensive, apart from some short-dated and sticky bonds."

He was keeping an eye on Dolphin Energy's 2021s, which from November to May moved 80 bps tighter. The notes have moved back out that same amount in the last month alone.

"It took six months to grind in, and then just three to four weeks to unravel," he said. "Heavy, defensive tone today."

Meanwhile, the primary market seemed to be shuttered. Issuers and investors, concerned about the possibility that the Federal Reserve may taper off its economic stimulus program, are eagerly awaiting this Friday's weekly jobless claims report from the United States, a trader said.

Middle East in focus

Some notes from the Qatar sovereign are 5 bps to 10 bps wider on the week while Qtel International's notes are 15 bps to 25 bps wider, the London trader said.

"Bahrain is really very well offered," he said. "The credit is 30 bps to 40 bps wider on the week as the 2020s trade at 107."

Dubai Holding's notes were outperformers on Thursday, with the company's 2014 euro notes holding well and unchanged on the week, he said.

"Front-dated Abu Dhabi National Energy Co., National Bank of Abu Dhabi and Mubadala are still holding OK, and parts of the International Petroleum Investment Co. curve are also doing OK," he said.

DEWA widens

Notes from Dubai were well offered on Thursday while Dubai Electricity and Water Authority's 2020s were seen at z-spread plus 275 bps on the bid side.

"That's now 40 bps wider on the week," a trader said.

International Petroleum Investment Co.'s 2023s were sighted at 105 bid, 105¼ offered, unchanged on the month.

And Cairo-based African Export-Import Bank's recent $500 million issue of 3 7/8% notes due 2018 that priced at 99.282 was lifted in trading on Thursday, a trader said.

HSBC, Commerzbank, Mitsubishi UFJ Securities and Standard Bank were the bookrunners for the Regulation S deal.

Ukraine corporates see demand

From Ukraine, bonds have been hit by the larger market's sell-off, said Svitlana Rusakova of Dragon Capital.

Longer-dated bonds lost the most ground, with the 2023s suffering the most.

Corporates have also been moving lower, with some sellers sighted.

"Though we still see demand for higher-yielding issues," she said.

Huaneng Power final book

The final book for China Huaneng Power International Inc.'s $400 million 3 3/8% notes due 2018 was $550 million, a market source said.

The notes priced at 99.763 to yield 3.427%, or Treasuries plus 240 bps via JPMorgan, Bank of China, Wing Lung Bank, CCB International Capital, DBS Bank, Goldman Sachs and ICBC Asia in a Regulation S deal.

About 96% of the orders came from Asia and 4% from Europe. Banks accounted for 73%, funds and asset managers 22%, private banks 3% and insurance and others 2%.

© 2015 Prospect News.
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