PTTEP prices deal; improved investor sentiment boosts EM bonds; Russian names in demand

By Christine Van Dusen

Atlanta, June 7 - PTTEP Canada International Finance Ltd. printed notes as bonds from Russia, Ukraine and the Middle East got a lift on Thursday after China's surprise rate cut and the Federal Reserve's comments encouraged investor sentiment.

Still, trading action was somewhat limited, given the holidays in Europe and Wednesday's significant spread compression, a London-based analyst said.

"It's not surprising that the market is relatively quiet on the open," she said. "However, early flows suggest the market remains well supported and buoyed by ongoing Asian demand."

Indeed, as the European morning went on, emerging markets bonds saw buying.

Russia's 2042 bonds were in demand, having moved up four points on the week to 104.75, he said.

"It is worth noting that the recent more upbeat mood in markets came after the weak payrolls release," according to a report from Barclays Capital Markets. "Some of it is due to hopes of European progress but an increased likelihood of Fed easing probably explains some of it."

Wednesday's laggards - Gazprom and KazMunaiGas - started to perform on Thursday, with KMG offering some liquidity. Gazprombank's 2017 bonds were trading at 101, 15 bps tighter from issue.

And Ukraine opened 10 bps firmer.

"But there are so few trades there right now, with prices just moving around with sentiment," a trader said.

By the afternoon, emerging markets bonds were making "huge moves" on the back of China's rate cut and news that the Federal Reserve is ready to act.

"So with Spain 100 bps tighter versus Bunds since Friday, it's just a frenzy for EM risk," a trader said.

Russia continued to trade with large volumes in the sovereign curve and some corporates.

"The Turkey sovereign is also up two points," he said. "What's interesting, though, is that while client activity is definitely all adding risk, their level of activity is not commensurate with the activity in the Street."

In other news from Turkey, market-watchers were whispering about a possible issue of ruble-denominated bonds from lender GarantiBank.

Latin bonds climb, drop

Latin American bonds were somewhat active on Thursday, a New York-based trader said.

"We picked up this morning where we left off at yesterday's close, with an unabated run, higher and tighter. And now we are seeing fairly strong Street flows to backup the continued run higher," he said at midday. "In the last half-hour, however, we have seen the run not only lose steam, but we've seen some pretty strong Street selling at the higher levels and the prices and spreads have relaxed back about a 1/2-point to ¾ of a point."

That's a fairly significant drop, he said.

"Dealers have been bid-hunting on the inter-dealer screens, with many different credits getting hit," he said. "But overall the tone is still positive, as any new rhetoric out of the euro zone will send markets popping back up."

Abu Dhabi names perform

Looking to the Middle East, 10-year Abu Dhabi risk saw some buyers from the United States, a trader said, with Abu Dhabi National Energy Co. and Dolphin Energy benefitting.

"Though there was a slight fade of broader markets into the close, that wasn't really the case here," the New York trader said. "Overall it was a very solid performance, with IPIC and Dubai names leading the charge."

IPIC, he said, is now 25 bps better on the week, while Dubai bonds are anywhere from 25 bps to 30 bps tighter.

"The 2017s and 2022s continue to have a good feel to them and are up over three points versus issuance," he noted. "Decent week-on-week moves. Month moves show how well the front end has held in."

Demand for bank paper

Bank paper from the Middle East and North Africa remained well supported, he said. Ongoing demand was noted for Qatar National Bank, Saudi Arabia-based Banque Saudi Fransi and National Bank of Abu Dhabi.

Banque Saudi Fransi's 2015 notes - which traded Wednesday at 104.62 bid, 105.37 offered - were quoted Thursday at the same level.

South Africa notes active

From South Africa, five-year credit default swaps were trading at 176 bid, 181 offered.

The sovereign's 2024 notes made "amazing" moves, a trader said. The notes were seen Thursday at 106 bid 106.75 offered.

"Time and again it has seemed like selling on the upticks has proven a sound idea," he said. "However, with 10-year Treasuries back to 1.65% - and the S&P now 55 ticks off the Monday low, and Spain's 10-year back to 6.1% - the market has certainly been taken off the pressure cooker."

Kazakh lenders in focus

As the Development Bank of Kazakhstan continued on its roadshow, the company's existing 2015 bonds were "squeezed," a trader said.

"The squeezed 2015s are still 30 bps through KazMunaiGas," he said.

The Astana, Kazakhstan-based development lender is planning a $500 million issue of short-term Islamic bonds.

Meanwhile, Almaty, Kazakhstan-based Kazkommertsbank released its first-quarter earnings results, which showed a 7% rise in net profit.

"The KKB bonds remain highly illiquid, and despite offering over 400 bps to Halyk, they attract very little investor interest," the London analyst said. "We remain cautious on the fundamentals."

CAF plans benchmark notes

Venezuela-based lender Corporacion Andina de Fomento (CAF) is planning a $500 million-maximum issue of global notes due 2022, according to a company filing.

Deutsche Bank, Goldman Sachs and HSBC are the bookrunners for the Securities and Exchange Commission-registered deal, which includes an exchange offer for holders of CAF's outstanding 8 1/8% notes due 2019 and 5¾% notes due 2017.

Proceeds will be used for general corporate purposes, including the funding of lending operations.

CAF recently priced a CHF 60 million add-on to its existing notes due Dec. 19, 2014 at par to yield Libor plus 145 basis points, a market source said.

Credit Suisse was the bookrunner for the transaction.

The original issue of CHF 175 million also priced at par to yield Libor plus 145 bps.

Malaysian bank sets tenor

Kuala Lumpur's Export-Import Bank of Malaysia Bhd. set the tenor at 5½ years for a dollar-denominated issue of senior notes, according to a syndicate source.

The notes will be issued via BNP Paribas, CIMB, Maybank and Nomura Securities under the bank's $1.5 billion medium-term notes.

As previously reported, the bank held a roadshow during the week of May 28 in Malaysia, Singapore, Hong Kong and London.

PTTEP prices bonds

In its new deal, PTTEP Canada priced $500 million 6.35% notes due June 12, 2042 at par to yield 6.35%, or Treasuries plus 359.6 bps, a market source said.

Citigroup, Deutsche Bank, HSBC and UBS were the bookrunners for the Rule 144A and Regulation S deal.

Aleesia Forni contributed to this article.

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