Emerging market debt sees relief rally, Vietnam to issue $500 million global bond

By Reshmi Basu and Paul A. Harris

New York, Oct. 17 - Emerging market debt saw higher bond prices Monday as investors found comfort in Friday's release of U.S. CPI data. Oil producers were also well bid on higher oil prices.

In primary news, Vietnam plans to issue $500 million in 10-year bonds next week.

"When the market is so tight, any sort of news will pull it down," said a market source. "EM was very focused on inflation and now there's a sigh of relief," he added.

As reported Friday, the consumer price index jumped 1.2%. But core consumer prices, excluding food and energy, increased just 0.1% in September, half the expected hike. That number helped bring stability to the market on Friday, which saw sharp sell-off in previous sessions.

"The market is still really expensive," noted the source, but added that investors saw Monday as an "entry point to buy more paper.

"The market saw a little correction.

"There's really no other place for people to go."

A trader characterized Monday's performance in emerging market as a relief rally.

"There are better bids," said another trader. "The inflation fears are less pronounced today [Monday]," he added.

"And the market sort of ignored [U.S] Treasuries. People saw an opportunity to come in after last week."

Treasuries fell for the fifth session Monday as the yield on the 10-year note just came short of 4½%. A turnaround in equities cut short a winning session for the Treasuries market. Stocks gained momentum on news that General Motors Corp had reached an agreement on health care costs with unions. By the close of trading Monday, the yield on the 10-year note stood at 4.49% up slightly from Friday's close of 4.48%.

During the session, emerging markets saw higher prices. The Brazil bond due 2040 gained 0.85 to 119.05 bid. The Mexico bond due 2026 added two points to 158 bid. The Philippine bond due 2025 moved up 1.12 to 113.56 bid. The Venezuela bond due 2027 gained 1¼ points to 112.90 bid.

Vietnam to issue

In the primary market, Vietnam plans to issue its first international bond next week. The nation will launch a series of roadshows for a $500 million offering of 10-year bonds this week.

Credit Suisse First Boston is the lead manager for the deal and Citigroup, Nomura Holdings, Deutsche Bank HSBC, JP Morgan, Merrill Lynch and Morgan Stanley are part of the syndicate.

Also on the new issue front, Singapore's Sateri International Co. Ltd. plans to start a roadshow for a $300 million dual tranche offering of bonds on Thursday in Singapore.

The issue will include a minimum of $150 million in bonds with a maturity of five- or seven-years as well as a minimum $100 million in perpetual bonds. Those bonds will be non-callable for five years with no step up.

Credit Suisse First Boston and Merrill Lynch are running the Rule 144A/Regulation S transaction.

One market source said that the environment for issuers is much more discerning now.

"Issuers are going to have to give a little bit more of a pick up. Before people were just happy to get any type of paper in their hands. The story is more about quality now," he added.

"But there is still demand for paper. There's really not that much in the pipeline."

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