Emerging markets rally with stocks; Russian corporates tighten; Lebanon sets eurobond mandate

By Paul A. Harris

St. Louis, Feb. 16 - Cash bonds and credit-default swaps tightened on Tuesday in Europe and the United States, market sources said. And in Europe, emerging markets debt caught a tailwind from rising stock prices, according to a London-based trader who focuses on Russian corporates.

European stock prices tended to make headway thanks to stronger-than-expected economic numbers and confidence that the European Union will see its way through the balance sheet difficulties of Greece, and possibly of other E.U. member states, the trader said.

"The stock markets like the news," the trader remarked, adding that crude oil prices had risen 4% on the day heading into the European close.

"Credit was strong, especially bonds," the trader said, noting that Russian corporate paper was 5 to 10 basis points tighter on the European day.

OAO Gazprom bonds maturing in 2014 were going out 108 7/8 bid, 109¼ offered, 10 bps tighter on the day.

Primary completely dead

The only primary market news came from Russia's Alliance Oil Co. Ltd. (/B+/B), which began a roadshow for a benchmark-sized dollar-denominated offering of Rule 144A and Regulation S global bonds in Europe, sources said.

The deal, via BNP Paribas, Credit Suisse and JPMorgan, makes the rounds in Europe this week and moves to the United States next week, sources said.

In the United States, where stocks also rallied, emerging markets debt tightened marginally, according to a syndicate banker in New York.

Meanwhile, the primary market - both high grade and high yield - is completely dead, the banker added.

However, recent jitters are not sending investors scrambling away from risk, the banker added, noting that such a scramble would do them little good, since there is very little high-grade paper to buy.

"We need to wait until we see supply coming back into the equation," said the banker.

"We're in a blackout period, so there isn't a lot of supply coming in."

Marginally tighter

Latin American credit tightened marginally on Tuesday, according to the New York-based syndicate banker, who spoke after the close.

Venezuela's five-year CDS finished the session 5 bps tighter. Brazil's finished 8 bps tighter. Mexico's finished 7 bps tighter.

Argentina's CDS, meanwhile, continued to widen, the banker said.

Lebanon taps banks

The Republic of Lebanon (B2/B/B-) mandated BNP Paribas, BLOM Bank SAL and Fransa Invest Bank SAL to lead a eurobond offering, according to a market source.

The deal comes to market under the auspices of Lebanon's medium-term note program.

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