EM bonds tighten; Turkey's Bank Asya outperforms; YPF, Pertamina, Costa Rica advance deals

By Christine Van Dusen

Atlanta, March 28 - Emerging markets bonds ended the week mostly tighter as deal flow slowed, Ukraine-related anxiety lessened and investors focused on moving into the next month.

"[Emerging markets] has enjoyed consistent tightening this week on a combination of no further sanctions on Russia, no issuance, and the end-month effect," a London-based analyst said. "Once we enter April, with the potential for volatility after the Turkish local election this weekend, EM may well take a different path."

Trading for the last few weeks has been a bit directionless and opportunistic, she said.

Most banks from Russia ended the week 29 basis points tighter, though Credit Bank of Moscow's 2018s outperformed, narrowing 66 bps, she said.

That bond was "helped by news it had signed a $500 million syndicated loan facility," she said. "An obvious concern for Russia, going forward, will be access to funding from banks, especially if sanctions tighten further."

Bonds from the short end from Gazprombank also tightened, with the 2015s moving in 83 bps.

"Investors took advantage of mis-pricings in the aftermath of the recent sell-off," she said.

OAO Sberbank's 2024s, which have underperformed in recent weeks, also stood out on Friday.

"We still see value in the bonds," she said. "Russian corporates were also tighter."

OAO Gazprom was an underperformer by Friday as a result of continuing concern about Ukraine.

Trading of bonds from Latin America was slow on Friday, a New York-based trader said.

"We're sitting on our hands," he said.

In other news, Argentina's Yacimientos Petroliferos Fiscales (YPF) was on a roadshow, Indonesia's PT Pertamina planned its own marketing trip, and Costa Rica mandated bookrunners.

Turkey tightens

Bonds from Turkey were tighter by Friday, even as political tension increased related to local elections, the analyst said.

"This weekend's local election will have a clear impact on direction going forward," she said.

Sovereign bonds narrowed, with the 2024s tightening by 34 bps.

Turkish banks managed to tighten 29 bps at the end of the week, with Asya Katilim Bankasi AS (Bank Asya) 2023s narrowing dramatically by 300 bps on the news that Qatar Islamic Bank could make a strategic investment.

"Good performance of short-end Akbank as the curve normalizes," she said. "Turkish corporates were more mixed, 7 bps tighter on average."

Croatia eyed

Croatia's dollar notes were trading on the offer side as yields fell between 10 bps and 15 bps near the end of the week, according to a report from Erste Group Research.

"Central and emerging Europe bonds and currency were driven by the International Monetary Fund bailout for Ukraine and an increasing probability of quantitative easing in the euro zone," the report said.

Middle East continues rally

Bonds from the Middle East continued to rally on Friday, with most paper tightening in, a trader said.

This has been helped by the lack of issuance in the sector, she said.

"Middle Eastern banks were 18 bps tighter on the week, with very strong performance from perpetuals like Dubai Islamic Bank and Abu Dhabi Islamic Bank," she said.

Abu Dhabi Commercial Bank underperformed, she said.

YPF on marketing trip

Argentina-based petroleum and natural gas company YPF is on a roadshow for a dollar-denominated issue of notes, a market source said.

HSBC, Itau BBA and Morgan Stanley are the bookrunners for the deal.

The marketing effort began on Friday with investor calls and will end with a trip to London on March 31.

Pertamina, Costa Rica on deck

Indonesia-based oil and gas company Pertamina will set out on Tuesday for a roadshow to market a dollar-denominated issue of Islamic bonds, a market source said.

The company previously mandated Barclays, Citigroup and HSBC as bookrunners for up to $3 billion of notes.

And Costa Rica has mandated BofA Merrill Lynch and Deutsche Bank as bookrunners for up to $1 billion of notes with varying maturities, a market source said.

The notes will be due in as few as 10 years and as many as 30 years.

Icici draws orders

The final book for India-based Icici Bank Ltd.'s new A$150 million issue of 6 1/8% notes due 2019 was A$350 million from about 80 accounts, a market source said.

The notes priced at 99.665 to yield 6.205%, or mid-swaps plus 245 bps, following talk in the 250-bps area.

ANZ and HSBC were the bookrunners for the Regulation S deal.

About 66% of the orders went to Asia, 29% to Europe and 5% to Australia.

Banks and financial institutions picked up 58% and private banks 42%.

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