Asian debt eases; Argentina hammered by headline news; Gazprom rolls out benchmark-sized deal

By Paul Deckelman and Aaron Hochman-Zimmerman

New York, July 17 - Emerging markets bonds were seen mostly unchanged to slightly weaker in trading Tuesday, buffeted by competing currents.

On the one hand, U.S. Treasury issues declined amid signs of economic robustness in the American economy.

On the other, concerns ebbed that the problems of the troubled subprime lending industry might completely overwhelm the capital markets and optimism rose as the bellwether Dow Jones Industrial Average climbed into uncharted new territory, with the benchmark now above the 14,000 mark for the first time ever.

"It was basically a wash," one market source said.

The same was true for the widely watched gauge of investor risk tolerance, JP Morgan & Co.'s EMBI+ index, which projected an average spread between emerging debt and its U.S. counterpart of 171 basis points.

Among the emerging names in the news, Argentina's bonds suffered the biggest setback following the resignation under fishy circumstances of the country's economy minister - even though observers say the change in names on the door of the economics ministry really doesn't amount to a hill of beans.

Brazil's widely traded bellwether bonds were seen a little lower on the session, but without much conviction.

Colombia's peso-denominated bonds firmed, along with that nation's currency unit, as Bogota outlined its plans to cut spending.

In the primary, the market chop that has prompted prospective corporate issuers to walk away empty handed, pulling offerings due to market conditions, has not impressed one of the sector's most familiar 800-pound gorillas: Russian natural gas giant OAO Gazprom rolled out a benchmark-sized deal on Tuesday.

Argentina off on ministerial mess

Argentina's bonds were seen as the biggest loser in the emerging sphere, continuing the retreat seen Monday amidst the political turmoil revolving around now-former economy minister Felisa Miceli. The country's 8.28% dollar-denominated bonds due 2033 were off ½ point, quoted at 96.85, with the yield on the bonds widening by 5 bps to 8.55%.

Another source saw the country's bonds off about 0.3% on average Tuesday, with the Par bonds in dollars down 0.7% in over-the-counter trading.

Argentine spreads had risen about 2 or 3 bps and prices had eased accordingly during the trading session Monday on speculation that Miceli would resign her post in the wake of a government probe of a mysterious bag full of money found in a cabinet in the bathroom of her office. The $64,000 question - coincidentally, the amount of cash stuffed into the bag - is whether the money is, as Miceli insists, just family funds lent to the ousted minister by her brother for a house purchase, which she held in her office for safe keeping - or whether the presence of a large sum of money in a paper bag tucked into an obscure corner of a politician's office is a sign of something more nefarious.

Miceli did in fact did resign, after the markets had closed Monday, but the speculation about what impact this might have on the already problem-plagued government of president Nestor Kirchner - not to mention the presidential campaign of his wife, senator Cristine Fernandez Kirchner, considered the front-runner to succeed her constitutionally term-limited husband in the Oct. 28th election.

Miceli was replaced by economist and industry secretary Gustavo Peirano as her replacement.

In a research note Tuesday, Lehman Brothers said the change at the top in the Economy Ministry is essentially much ado about nothing economically, other than "a growing social concern about governmental corruption." Miceli, the analysts said, "was effectively powerless and had no ability to push any significant initiatives," and said her replacement "likewise, will have no ability to bring any changes on his own."

Lehman further opined that the change "is only of very marginal importance and [is] unlikely to cause those that remain concerned about Argentina's prospects to pile up on Argentine risk."

Argentine bonds have been the biggest losers in the emerging sphere so far this year, with a double-digit deterioration from where they ended 2006. Among other problems which have cause the bonds to fall is investor skepticism about the truthfulness and accuracy of economic data issued by Buenos Aires, after Kirchner abruptly replaced the long-time head of the government's statistics bureau earlier this year and replaced him with an official widely derided by administration critics as a political hack.

Brazil easier, Colombia better

Elsewhere, Brazil's bonds were seen easier on the session, on no particular news. The benchmark 11% dollar-denominated global issue - considered the most liquid and widely-traded EM bond - was quoted having edged downward by 0.10 point to 131.35, with the bonds' yield edging up 2 bps to 6.04%.

Colombia's benchmark 11% peso-denominated bonds due 2020, on the other hand, were seen having improved, up more than ¼ point to just under the 109 mark, while the yield came in by 5 bps to 9.75%.

The bonds firmed even as the peso also strengthened, buoyed by the announcement that the country will cut nearly $600 million in expenditures from its 2007 budget in order to slash its deficit. It hopes to bring the shortfall down to 0.7% of the country's GDP from the current 0.9%.

Asian bonds lower on subprime jitters

Outside of Latin America, bonds were seen having fallen during the Asian trading day earlier Wednesday, before the release of the positive U.S. wholesale price inflation figures and the Merrill profit figures showing only limited impact from the subprime troubles.

The Philippine government 2031 bonds, considered a benchmark Asian issue, were seen at 110.125 bid, 110.375 offered, down from Monday's New York finish at 110.625, while its 2032 bonds backpedaled to 96.125 bid from 96.375.

The price on five-year credit default swaps contracts on Philippine debt was seen having widened out to levels in the low 120 bps area, from prices around 114-118 bps on Monday.

Gulf Finance completes sale

Gulf Finance House priced $200 million five-year floating-rate notes (BBB-).

The deal sold at par and came on top of the initial guidance of Libor plus 125 basis points.

Dresdner Kleinwort and HSBC had the books.

Specific numbers have not been released, but the deal was comfortably oversubscribed, according to an informed source.

The source pointed to the quality of the roadshow and the work HSBC and Dresdner Kleinwort did in order to obtain a secure order book.

Edenor, Morgan Stanley talk

Empresa Distribuidora y Comercializadora Norte SA (Edenor) issued talk for its $220 million in 10-year bonds (B2/B) of 9¼% to 9 3/8%.

Citigroup and Deutsche Bank have the books for the offering which was recently lowered from $250 million.

The issue features five years of call protection and is expected to price Wednesday.

Morgan Stanley announced it will issue an add-on to its 10.09% Brazilian reais-dominated 10-year notes (Aa3/A+), expected to price at 100.647 with a yield of 9.98%.

The notes due May 3, 2017 will be payable in dollars.

New deals from Gazprom, TGI, Empresa del Telecom

OAO Gazprom is planning a dollar-dominated benchmark-sized issue.

ABN Amro and Morgan Stanley will take the books for the government-run gas giant.

The "extensive" U.S. roadshow will be held next week with pricing to follow, according to a source close to the deal.

An emerging market syndicate official said the upcoming roadshow will likely look very similar to the presentation given for the Rosneft deal which was cancelled earlier in the week.

Elsewhere, Colombia's Transportadora de Gas del Interior Ltd. (TGI) is bringing a combined $900 million senior bonds (BB or BB- expected/BB) in two tranches.

ABN Amro will market the deal, which will have a peso-dominated long-term tranche and a dollar-dominated medium-term tranche. The sizes of each are still to be determined.

A roadshow will be held in London on Thursday and Friday, and in the United States during the week of July 23. Pricing is expected to follow the roadshow.

Colombia coincidence

Meanwhile the shareholders of Empresa de Telecom de Bogota have approved the sale of a $300 million local-currency bond.

The deal has not yet been mandated.

The announcements by TGI and Empresa de Telecom, both based in Bogota, Colombia follow the announcement of a $300 million deal from the City of Bogota itself on July 11.

The three deals total $1.5 billion, but their timing is "a complete coincidence," according to a sellside source.

The City of Bogota had that deal in the works for four years, the source added.

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