Union Bank of India sells notes; Middle Eastern names buck inactivity trend for EM bonds

By Christine Van Dusen

Atlanta, Aug. 15 - Union Bank of India (UBI) sold notes on a Wednesday that saw retail investors pick up Middle Eastern bonds like Emaar Properties, Jebel Ali Free Zone (Jafza) and Majid Al Futtaim amid calm markets and otherwise slow trading for emerging markets assets.

"Even though it is the summer, trading volumes are fairly low for the information being brought to markets these days," said Jose Wynne of Barclays Capital Markets. "This pause may extend a few days longer but there will be plenty of reasons for volume to pick up in September that go beyond the seasonal issues."

Better economic data helped to maintain the peaceful tone on Wednesday as investors awaited the results of the upcoming meeting of the Federal Reserve in Jackson Hole, Wyo. Also ahead are the non-farm payroll numbers from the United States.

These events "could turn into key triggers for market participants to re-engage," Barclays said.

Barclays also expects the European Central Bank to take further easing measures to support peripheral bond markets.

None of this had much impact on bonds from the Gulf region on Wednesday, a trader said.

Flows were fairly solid, with good performance from Dubai names, and Bahrain had good two-way activity.

Bahrain's 2022 notes saw a high print of 100.25 before closing at 99.50 bid, par offered.

"Bahrain's 2020s and 2022s were a little heavy today. Spread-wise they're still 20 [basis points] to 25 bps tighter on the month," the trader said. "Given the steady and consistent supply out of Dubai this year, one has to keep an eye on more paper printing from this credit and space."

The 2017 bonds from DP World are unchanged on the month after a "super run," he said.

"The 2037s are almost two points off the high," he said. "But it does feel like there's some paper around."

Gulf 'moderately active'

All told, it was a moderately active day for credits from the Gulf region, a trader said.

"We definitely did see some real money and account selling today. Not in massive size, but it was steadily ticking along," he said. "We're expecting an interesting few weeks coming up."

Many of the bonds from the Middle East were up between five and 20 points on the year, he said. Long-dated notes from Abu Dhabi National Energy Co. (TAQA), Qatar and International Petroleum Investment Co. (IPIC) have made stunning moves in cash prices.

"In some cases they're gapping higher," he said. "Some long-dated supply and a lack of Street shorts to fill in could see these bonds lower, however looking at curves generally that remain flat-ish, holding bonds on spread may present an opportunity."

Qatar's 2042 bonds were quoted up at 127, about 53 bps tighter on the month.

SECO paper trades well

Saudi Electric Co. saw its 2022 paper trade at good size around 108.50 on Wednesday.

But some Middle Eastern names lagged, like Dar al Arkan and its 2015 notes, which got stuck at the 108 bid, 108.25 level after the redemption of their 2012 notes, he said.

"The paper was offered at 107 today in the market," a trader said.

"I get the sense September could be busy in this part of the world, with locals back from summer and Ramadan holidays and the new issue market kicking back into life. The final quarter of last year was pretty decent, supply-wise."

Africa in focus

Looking to Africa, most names were trading well, a London trader said.

Nigeria was 75 bps tighter on the month at about 112.25, and Nigeria-based Access Bank plc's recent notes got some attention in the secondary market.

The commercial lender's $350 million issue of 7¼% notes due 2017 priced at par via Citigroup and Goldman Sachs in a Rule 144A and Regulation S deal.

"Having hit as low as 98.25 bid, 98.50 offered after the deal printing, it's now bid in the Street at 102," he said.

Namibia's notes were at 108 on the bid side, about 70 bps tighter on the month.

"They're hard to source," he said. "And it's the usual story on Gabon and Ghana. GTB's 2016s are nicely placed. Senegal, meanwhile, is also the best part of 75 bps tighter on the month."

Egypt looking at loan

Also from Africa, Egypt's 2020 notes traded Wednesday at 97.37 bid, 98.37 offered, unchanged from Tuesday, after the sovereign floated the possibility of a $4.8 billion loan from the International Monetary Fund.

The sovereign's 2040 notes were seen Wednesday at 87.50 bid, 89 offered. On Tuesday, the notes were quoted at 88 bid, 89 offered.

Meanwhile, the eurobond market in Russia remained mostly flat on Wednesday, according to a report from UFS Investment Co.

"Dynamics in most issues didn't exceed 0.1%," the report said. "By and large, external background remains neutral."

These dynamics should remain in place until at least the end of the month, UFS said.

Union Bank prints notes

In its new deal, Mumbai-based Union Bank priced a $350 million issue of 4 5/8% senior unsecured notes due 2017 at 99.726 to yield 4.687%, or Treasuries plus 390 bps.

Barclays, Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Standard Chartered Bank and HSBC were bookrunners on the deal.

Market sources were also whispering about possible notes from two Singapore issuers. SBS Transit could be mulling a Singapore-dollar deal with a five-year tenor, while property developer CapitaLand may be looking at up to S$5 billion of notes.

"I'd expect the first week of September to open up, supply-wise, post- the Labor Day holiday in the [United States]," a trader said.

Aleesia Forni contributed to this article.

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