Nostrum to market bond issue; economic data keeps investors cautious; Bahrain bonds eyed

By Christine Van Dusen

Atlanta, Feb. 3 - Amsterdam-based Nostrum Oil & Gas Finance BV, a subsidiary of Kazakhstan's Nostrum Oil & Gas LP, set a roadshow for a dollar issue of notes on Monday as investors remained wary of risky assets.

"February has begun with some weak macro data, most noticeably China's non-manufacturing PMI data, which missed estimates," a London-based analyst said. "There were disappointing numbers in [emerging markets] as well."

Manufacturing data from Russia fell short of expectations, and inflation increased for the month of January in Turkey, she said.

"Slightly quiet open with Asia largely still out, but we continue to see the same themes as we have witnessed in recent weeks," she said. "Turkey is opening defensively while Russia is largely unchanged. And the Middle East continues to remain the stalwart of our regions."

Bonds from Bahrain and Bahrain Telecommunications Co. were particularly popular in trading on Monday, a trader said.

"Qatar trades OK," he said. "The sovereign is wider on the week. Just not keeping up with the U.S. Treasuries move."

Meanwhile, Qatar's Ooredoo QSC (formerly Qtel International) was downgraded to A- with a stable outlook from Standard & Poor's, a trader said.

The 3.039% notes due 2018 that the telecommunications company priced at par moved to 100¼ bid, 100½ offered on Monday, he said.

"We saw no meaningful move on the credit at all today," he said. "Still feels like there are buyers of 2021s and 2023s in Qtel."

Two-way activity was noted for perpetual notes from the Middle East, he said.

"There are buyers of Lebanon and front-dated paper is holding very firm," he said. "The recent Kipco is ticking along nicely at the recent highs, now that the loose bonds have been sold."

He also saw ongoing demand for Qatar National Bank and National Bank of Abu Dhabi paper.

Lat-Am investors 'skittish'

Looking to Latin America, investors were once again "skittish," a New York-based trader said.

Some bonds - including Brazil's Vale SA and Petrobras - widened in response to the spike in Treasury prices, he said.

"High-grade, price-based credits felt shaky again today as the market continues to lack conviction to any degree," he said. "Some real-money clients stepped in to buy some sovereign paper but were better sellers in most corporate names."

The new issue of 4¾% notes due 2024 from Chile's Empresa de Transporte de Pasajeros Metro SA (Metro de Santiago) that priced at 99.246 to yield Treasuries plus 210 basis points was holding in on price, he said.

"But it widened a few," he said.

Hungary under pressure

The market's risk-off tone put pressure on Central and emerging European markets, particularly Hungary, where local currency bonds sold off, according to a report from Erste Group Research.

"The short end of the curve experienced more pressure, resulting in flatter three-year and 10-year spreads," the report said.

Croatia saw its first currency intervention, but still local bonds held in "relatively well," the report said.

"In the short run, the trend could continue, with the local currency bonds outperforming the euro bonds," Erste Group said.

Russian bonds should narrow

Spreads for Russian bonds are expected to narrow this week, according to a report from UFS Investment Co.

The sovereign's eurobonds showed yield growth on Friday and moved in the opposite direction of Treasuries, which widened spreads.

"The yield of Russia's 2030s increased by 5 bps to 4.43% while the yield of 10-year U.S. government bonds dropped by 5 bps," the report said. "The spread of Russia's 2030s to Treasuries has expanded by almost 70 bps for three weeks since January 8, and we tend to consider its current value to be overly broad."

So spreads should start to tighten in, UFS said.

"Market dynamics will be influenced this week by the US labor market data," the report said.

Ukraine in focus

Ukraine entered the week battered, following a tough Friday as investors shunned the risky sovereign, said Svitlana Rusakova of Dragon Capital.

"The curve inverted significantly as the short end underperformed, with quotes quite close to the pre-Russia deal levels of mid-December," she said. "Corporates were also marked lower."

Still, there was some demand, particularly for Metinvest BV's 2018s at 92, she said.

Nostrum sets roadshow

Nostrum Oil & Gas Finance will set out on Feb. 6 for a roadshow to market a dollar-denominated offering of notes (/B+/), a market source said.

Nostrum Oil & Gas LP is formerly Zhaikmunai LP.

Citigroup, Halyk Finance, ING, Sberbank CIB and VTB Capital are the bookrunners for the Rule 144A and Regulation S marketing trip.

The roadshow will conclude on Feb. 7.

Minsur sells notes

Late on Friday, Peru-based mining company Minsur SA priced a $450 million issue of 6¼% notes due 2024 at 98.183 to yield 6½%, or Treasuries plus 383 bps, a syndicate source said.

The notes were talked in the mid-to-high-6% area.

Scotiabank, BofA Merrill Lynch and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds from the deal will be used for debt repayment and for general corporate purposes.

"The new Minsur 2024 is closing wrapped around fixed re-offer with a few Street trades but no customer inquiries or trades," a trader said.

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