Emerging market debt resilient despite disappointing equity performance; several issuers tap market

By Reshmi Basu and Paul A. Harris

New York, Nov. 9 - Emerging market debt saw an uneventful session Thursday, but showed resilience amid a softer performance by U.S. equities as well as fresh bonds coming into the market.

On Thursday, the Republic of Turkey reopened its 6 7/8% global bonds due 2036 to add $750 million via Lehman Brothers and Credit Suisse.

But the new supply did little to deter the country's performance as spreads tightened by two basis points.

Additionally, Turkey bounced back after prices eased Wednesday on news that the European Commission had set a deadline for the country to open its ports to Cyprus. If Turkey failed to comply, the commission warned that the country's efforts to join the European Union would be jeopardized.

On the corporate side, JSC Astana Finance of Kazakhstan sold a $175 million offering of five-year eurobonds (Ba1//BB+) at 99.017 to yield 9¼% via JP Morgan.

The deal priced in line with price guidance of the 9¼% area.

JP Morgan was the bookrunner for the Regulation S transaction.

Moving to Poland, Getin Bank SA placed a $100 million offering of two-year bonds (Ba2/BB) at par to yield 7 5/8%.

The deal came at the wide end of price guidance, which was set at 7½% to 7 5/8%.

Barclays Capital was the bookruner for the Regulation S transaction.

Emerging market debt flat

Emerging market debt was unfazed Thursday, as the market held on despite poor performances in equities and the flow of new deals.

Thursday's session was flat on both a dollar and spread basis, according to a source.

Overall, the market is beginning to lose its luster, given how tight spreads are, noted an analyst.

"I think investors are a wary of adding more risk since there does seem to be much more upside," he said.

Oil helps EM

On Thursday, sources noted that higher oil prices served to insulate the market from weaker U.S. stocks. As a result, oil credits such as Russia and Venezuela were the day's winners.

Russia saw its spreads tighten by 2 basis points while Venezuela's spreads came in by 4 basis points.

Meanwhile Latin America credits traded down. In trading, the bellwether Brazilian bond due 2040 gave up 0.20 to 131.85 bid, 131.90 offered.

Elsewhere, Argentina saw its dollar-denominated debt trade down amid concerns over new supply.

The joint bond issue with Venezuela in the Bono del Sur structure is underway, noted another analyst, who added that the market is expecting a bonar auction in the coming weeks.

In trading, the Argentinean discount bond due 2033 lost 0.50 to 101.30 bid, 101.75 offered. The Mexico bond due 2026 shed 0.25 to 160.25 bid, 161.25 offered.

"The mood is no longer quite as bullish as it was a couple of weeks ago. Investors are more cautious, but the market is quite resilient," added the market source.

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