EM bonds rally; Russia, Ukraine remain in focus; Slovenia paper widens; Nan Fung prices

By Christine Van Dusen

Atlanta, May 23 - Emerging markets notes rallied on Friday morning - with bank bonds from Russia tightening - even as violence erupted in the east of Ukraine ahead of next week's presidential election.

Pro-Russian separatists fought with a Ukraine militia group on Friday, leading to at least two deaths and raising further questions about whether Ukraine's election will proceed smoothly. If Russia interferes, the United States and Europe are expected to institute sanctions.

Still, many Russian bonds performed strongly on Friday, a London-based analyst said.

"There was strong performance from Vnesheconombank, in particular. The 2020s were 56 basis points tighter," she said. "Russian Agricultural Bank 2021s were 76 bps tighter. Gazprombank was also in demand. Both VEB and Gazprombank have previously been affected by concerns about sanctions, and this week's moves have reflected Putin's more conciliatory language."

Russia's JSC VTB Bank managed to underperform, with its 2035s and 2022s standing out as laggards, she said.

"Some of the tighter-trading names - Sberbank, Eurasian Development Bank - also underperformed," she said.

Among Russian corporates, Russian steel producer OAO TMK was the clear standout, following news that China and Russia had signed a gas supply deal. TMK will supply the pipes.

"The 2020s were 118 bps tighter," she said.

Also from Russia, OAO Sibur Holdings was in focus on Friday after the petrochemical company sold a terminal to the Russian Direct Investment Fund, Gazprombank and a group of foreign investors.

"Funds from the sale of the port will be allocated to other projects of the company," according to a report from UFS Investment Co. "We expect a positive reaction to the news in the quotes of traded eurobond Sibur 2018."

Turkey narrows

In other trading during the week, bank bonds from Turkey narrowed slightly, led by Asya Katilim Bankasi AS (Bank Asya), the analyst said.

"Corporates showed few moves of note," she said.

Sovereigns from elsewhere in emerging markets were touched by peripheral issues in Europe. Slovenia paper widened about 20 bps, and long-end bonds from Romania moved out a bit, she said.

"Investors are taking profits following the investment-grade upgrade, although bonds have recovered slightly at the end of the week," she said, referring to Romania. "Poland, in contrast, saw tightening a few bps across the curve."

Gulf International performs

Bonds from the Middle East were, generally, unchanged during the week, a trader said.

"In banks, Gulf International Bank's 2017s were the top performers while Abu Dhabi Commercial Bank 2023s also outperformed," she said. "Emirates NBD underperformed, with the 2023s 13 bps wider on the back of a large seller."

Nan Fung does deal

On Thursday, China's Nan Fung International Holdings Ltd. sold $200 million 4 7/8% notes due May 29, 2024 to yield Treasuries plus 240 bps, a market source said.

Agricultural Bank of China, BofA Merrill Lynch, Credit Suisse, HSBC and Standard Chartered Bank were the bookrunners for the deal.

Nan Fung develops residential and commercial properties in Hong Kong.

Pertamina sells bonds

Indonesia's PT Pertamina priced $1.5 billion 6.45% notes due May 30, 2044 (Baa3//BBB-) at par to yield 6.45%, a market source said.

Barclays, Citigroup and HSBC were the bookrunners for the deal.

Pertamina is a state-owned oil and gas company based in Jakarta, Indonesia.

Issuance from Haitong

In another new deal from Thursday, Haitong Securities Co. Ltd. announced that Unican Ltd. priced RMB 500 million of 5.8% drawdown notes under its $1 billion medium-term note program established on May 16. The notes will be guaranteed by Haitong's wholly owned subsidiary, UT Capital Group Co., Ltd., the parent company of Unican.

The three-year notes will be issued at par on May 30.

Standard Chartered Bank (Hong Kong) Ltd., Haitong International Securities Co. Ltd., Hongkong and Shanghai Banking Corp. Ltd., UBS AG, Hong Kong Branch, BNP Paribas, Hong Kong Branch, BOCI Asia Ltd., Deutsche Bank AG, Hong Kong Branch, ICBC International Capital Ltd. are joint bookrunners with ICBC International Securities Ltd. as joint lead manager. Standard Chartered Bank and Haitong International Securities are also the joint global coordinators for the Regulation S deal.

Proceeds will be used for working capital and general corporate purposes.

Marisa Wong contributed to this article.

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