EM bond funds see more weekly outflows; spreads widen; Argentina bonds decline; Qtel up

By Christine Van Dusen

Atlanta, Aug. 16 - Most emerging markets names finished the week with wider spreads as the summertime slowdown put the brakes on the primary market and kept trading volumes thin.

The Markit iTraxx SovX CEEME ex-EU index spread on Friday moved to 240 basis points over Treasuries, wider from Monday by 7 bps. The Markit iTraxx Crossover index spread - seen Monday at 400 bps - finished the week at 410 bps.

Still, some bonds from Central and Emerging Europe, the Middle East and Asia "held up relatively well," a London-based analyst said. "We are another 2 bps wider this morning."

In trading on Friday, better retail investor buying was seen for euro-denominated bonds, including Russia-based Vnesheconombank's (VEB) 2023s.

"But activity remains muted," she said.

Latin American bonds ended the week on a weaker note, a New York-based trader said.

"The move to 2.85% in 10-year notes, weaker Latin American currencies and general risk aversion put pressure on EM credits," he said.

Five-year credit default swaps for Brazil moved out to 206 bps on Friday, while bonds from Venezuela and Petroleos de Venezuela SA (PDVSA) outperformed.

Bonds from Argentina declined as much as a ½ point, he said.

"Volumes remain light, with accounts better sellers of bonds," he said. "The breakout in US rates to higher levels brings sellers back to prune risk after the recent range-bound pattern of the last few weeks."

Meanwhile, emerging markets bond funds saw another week of outflows, increasing to about $834 million from $391 million in the previous week, according to a report from EPFR Global.

"The outflows were evenly balanced between local and hard currencies," the analyst said.

This extended the funds' outflows streak that began in May, EPFR said in its report.

Ukraine bonds resilient

Bonds from Ukraine remained resilient at the end of the week, even amid the pain of the Treasury moves, said Svitlana Rusakova of Dragon Capital.

"The most liquid play was the sovereign 2017," she said. "The 2022s and 2023s were down by a ½ point but with some demand."

Corporate notes outperformed, she said, with the State Export-Import Bank of Ukraine's (Ukreximbank) 2018s getting a lift.

"Meanwhile, [OJSC Oschadbank] 2018 remained weak," she said.

Qtel moves up in trading

From the Middle East, Qatar's Qtel International saw its 2043s move up a point, a trader said.

Abu Dhabi Commercial Bank's 2019s were spotted at 120¼ bid, 120¾ offered.

"That's 7 bps wider on the week," he said.

Turkey's CCI in focus

One trader was keeping an eye on Turkey-based bottler Coca-Cola Icecek AS, which was assigned a long-term issuer rating of Baa3 by Moody's Investors Service.

The company previously announced that it had mandated Barclays, Citigroup, HSBC and JPMorgan for an issue of international bonds.

"CCI already issued a $300 million private placement earlier this year," the trader said. "Considering that 20% of total debt is due for refinancing in 2013 and 76% in 2014, it is not a surprise that the group will be looking to tap the financial market. If it offers a good concession, we believe it could be an interesting investment opportunity."

KazAgro could print bonds

In deal-related news, Kazakhstan's JSC National Managing Holding KazAgro (KazAgro) is looking to issue eurobonds late this year or early next year, a market source said.

No other details were immediately available on Friday.

KazAgro is an Astana, Kazakhstan-based agricultural company.

New issue from Bolivia

On Thursday, Bolivia priced $500 million 5.95% notes due in 2023 at 97.794 to yield 6¼%, a market source said.

BofA Merrill Lynch and HSBC were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for general governmental purposes and infrastructure projects.

The deal attracted $1 billion of orders.

Korea Finance sells notes

Korea Finance Corp. on Thursday sold $500 million 2 7/8% notes due 2018 at 99.456, according to a company filing.

BofA Merrill Lynch, Citigroup, Deutsche Bank, Korea Development Bank and UBS were the bookrunners for the Securities and Exchange Commission-registered deal.

Proceeds will be used for general operations, including extending foreign currency loans.

Korea Finance is based in Seoul, South Korea.

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