Emerging market debt tightens on positive equities; several corporates add deals

By Reshmi Basu and Paul A. Harris

New York, Oct. 23 - Emerging market debt saw tighter spreads Monday as U.S. stocks locked in another record high.

Nonetheless, the session was described as quiet in anticipation of the Federal Open Market Committee interest rate-setting decision on Wednesday, according to a trader.

"The market just moved along, tracking equities higher," he said, adding that in the absence of U.S. economic data or headlines, there were no catalysts to give the market a hard push.

"The market is going along with the goldilocks story," he added.

Meanwhile Asian trading was quiet as Thailand, Indonesia, and Malaysia were closed for a holiday, which also contributed to the market's light trading volumes.

Overall, spreads tightened by two basis points but the asset class was down on a dollar-basis.

During the session, the bellwether Brazilian bond due 2040 gave up 0.15 to 98.80 bid, 99.50 offered. The Russian bond due 2030 shed 0.43 to 110.75 bid, 111 offered. And the Turkish bond due 2030 lost 0.88 to 149 bid, 149.50 offered.

"Overall sentiment is good," noted a market source.

"The market has been able to digest the new paper with no major problems.

"And 'most everyone is confident that inflation is under control and we're going to have a soft landing.

"There's not much upside to this market but there's also not much downside as well," he added

Pipeline gets bigger

In the primary market, several corporates added deals to the bustling pipeline.

Pakistan Mobile Communications Ltd. (PMCL) plans to start a roadshow for a $250 million offering of senior unsecured bonds (B3/B+) this week via ABN Amro and Deutsche Bank.

Also Banco de Credito del Peru SA plans to start a roadshow this Wednesday for a $120 million issue of 15-year subordinated tier II notes (Ba2//BB+)/.

The roadshow runs from Wednesday to the following Monday, stopping in the United States and London. Citigroup is managing the deal.

Next, state-run National Power Corp. (Napocor) mandated Citigroup and Deutsche Bank as joint bookrunners for bond financing.

The Republic of the Philippines will guarantee the issuance.

And pricing Monday, the Abu Dhabi National Energy Company PJSC (TAQA) sold a $3.25 billion offering of notes in three tranches (Aa3/A+), which market sources described at the biggest corporate deal out of the Middle East.

The deal included €750 million of seven-year notes, $1 billion in 10-year notes and $1.5 billion in 30-year notes.

The tranche of seven-year notes priced at 4.484% or a spread of 664 basis points over Bunds.

The 10-year notes priced at 99.485 to yield 5.944% or Treasuries plus 110 basis points while the 30-year notes priced at 99.049 to yield 6.573% or Treasuries plus 160 basis points.

Goldman Sachs was the bookrunner for the Rule 144A/Regulation S transaction. Abu Dhabi Commercial Bank and National Bank of Abu Dhabi were lead managers.

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