Middle Eastern bond spreads tighten; Ukraine unchanged; lower yields for Romania, Croatia

By Christine Van Dusen

Atlanta, July 3 – Yields rose for bonds from Central and emerging Europe on Thursday as spreads tightened for Middle Eastern bonds on the back of Treasury moves. But overall, the emerging markets universe was quiet ahead of the July 4 holiday.

“Some bonds remain heavy and offered,” a London-based trader said, pointing to sovereign bonds from Bahrain and paper from parts of Kuwait.

“Almost all of Qatar and Abu Dhabi remains pretty solid,” he said. “Definitely witnessed some money being put to work in the 10-year part of this area the past two days.”

The 2024 bonds from Dubai’s Majid Al Futtaim Holding LLC (MAF), Emaar Properties PJSC and Saudi Electricity Co. all traded well and saw demand on Thursday, he said.

Dubai-based Damac Real Estate Development Ltd.’s recent 4.97% notes due in 2019 that priced at par suffered, closing at 96 1/8 bid, 96 7/8 offered.

“That’s 55 basis points on the month,” he said. “All told, this market remains quite technical, and dealers are typically long in the same names versus short the same names.”

In other trading near the end of the shortened week, bonds from Ukraine were mostly unchanged, even as military operations renewed in the East and investors watched for Russia’s reaction, said Svitlana Rusakova of Dragon Capital.

“Quasi-sovereigns were mixed,” she said. “Corporates were mostly flat, with some demand pushing [UkrLandFarming plc] higher.”

Meanwhile, the primary market was mostly quiet, the London trader said.

“Supply surely has dried up until mid- to late-August now, so I suspect we remain a thin, fickle and illiquid space, for the most part, until then,” he said.

Yields in focus

Bonds from Central and emerging Europe saw higher yields for local currency and euro-denominated bonds during the week, according to a report from Erste Group Research.

Romania and Croatia were exceptions, however, with lower yields by the end of the week.

“[Romania] traded lower in yield across the curve, with the long end of the curve outperforming and tightening 6 bps in yield,” the report said. “[Romania] was also supported by recent actions of the Romanian central bank.”

Colbun prices bonds

On Wednesday, Chile’s Colbun SA sold $500 million 4½% notes due July 10, 2024 at 98.615 to yield 4 5/8% or Treasuries plus 205 bps, a market source said.

The pricing matched final talk, set in the Treasuries plus 205 bps area.

Citigroup, JPMorgan and Scotiabank Capital were the bookrunners for the Rule 144A and Regulation S deal.

The issuer is a Santiago, Chile-based utility company.

Indonesia prints notes

Indonesia priced €1 billion 2 7/8% notes due July 8, 2021 (/BB+/) at 99.37 to yield mid-swaps plus 195 bps, a market source said.

BofA Merrill Lynch, Deutsche Bank and Citigroup were the bookrunners for the Rule 144A and Regulation S deal.

Codelco does deal

Corporacion Nacional del Cobre de Chile (Codelco) priced €600 million 2¼% notes due July 9, 2024 to yield 2.397%, or mid-swaps plus 93 bps, a market source said.

Deutsche Bank, HSBC and Santander GBM were the bookrunners for the Rule 144A and Regulation S transaction.

Codelco is a Santiago, Chile-based copper mining company.

KNOC issues bonds

Also on Wednesday, Korea National Oil Corp. priced a two-part issue of $750 million notes due in 2019 and 2024, a market source said.

The $250 million 2¾% notes due in 2019 came to the market at a spread of 65 bps over Treasuries.

The $500 million 3¼% notes due 2024 came to the market at Treasuries plus 77.5 bps.

Other details on the pricing of the issue were not immediately available on Thursday.

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