Emerging market debt sees positive session; three corporates add to the pipeline

By Reshmi Basu and Paul A. Harris

New York, Aug. 31 - Emerging market debt traded with a positive tone Thursday while Brazil saw its credit rating move up one notch.

In the primary market, the Korean corporate pipeline is building up as two more banks hit the road.

Hana Bank will begin a roadshow on Monday in Singapore for a dollar-denominated offering of lower tier 2 bonds.

Barclays Capital, BNP Paribas and Deutsche Bank Securities are joint bookrunners for the Regulation S offering, the size of which remains to be determined.

Also, Shinhan Bank will conduct a roadshow in Asia and Europe from Sept. 7 through Sept. 12 for its dollar-denominated offering of 30-year hybrid tier I securities.

Barclays Capital, JP Morgan and Morgan Stanley will be the lead arrangers for the Regulation S offering. The size has still to be set.

Over to Brazil, Banco Mercantil plans to sell a dollar-denominated offering of 10-year lower tier II notes (B3 expected).

Banco Finantia and ING are the lead mangers for the Regulation S issuance of subordinated notes.

Brazil gains on Moody's upgrade

In other developments, Moody's raised Brazil's foreign- and local-currency bond ratings to Ba2, two levels below investment grade. The Moody's rating is now on a par with ratings from Standard & Poor's. However, the agency did issue a warning on government spending.

On that news, the country's sovereign curve extended gains for the second straight session, but sources noted that the rally was capped because the market had already somewhat priced in the upgrade.

Furthermore, there was more news on the Brazilian local front.

After market close Wednesday, the Brazilian central bank cut its key lending rate by 50 basis points, 25 basis points more than the market had anticipated.

Spreads tightened on the news with local buying, but eventually trading slowed down.

Brazil was up on the day. During the session, the bellwether Brazilian bond due 2040 added 0.70 to 130.65 bid, 130.70 offered.

EM positive

Asian trading saw a strong performance Thursday on retail interest for select high-yield corporate names. However, high-yield and high-grade sovereign names saw quiet trading. The Street was still nowhere to be seen.

Furthermore, by the time New York came in, investors had moved to the sidelines ahead of Friday's release of non-farm payroll numbers.

The previous day saw spreads for the asset class narrow on the revised reading of the U.S. Gross Domestic Product data, which fueled sentiment that the United States is not heading towards a hard landing.

On Wednesday, the asset class was well bid amid thin trading volumes, but on Thursday the asset failed to capitalize on the previous session's momentum, according to market sources. Trading stalled after a decent start in New York, said a trader.

Nonetheless, the market had "a good day," he added.

Asian names such as Indonesia and the Philippines were up on the day. In trading, the Indonesian bond due 2035 was higher by 1.37 to 115.37 bid, 115.87 offered. The Philippines bond due 2025 moved up one point to 131.12 bid, 131.50 offered.

Additionally, another trader noted that Thursday's tame reading of core consumer price inflation data and afternoon comments from Federal Reserve chairman Ben Bernanke about the strength of the U.S. economy failed to muster any momentum.

Elsewhere, the Colombian bond due 2033 was up 0.50 to 135.50 bid, 136.25 offered. The Russian bond due 2030 added 0.25 to 111.18 bid, 111.50 offered. And the Turkish bond due 2030 gained 0.63 to 149.25 bid, 149.75 offered.

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