Spreads widen on news ECB won't buy more bonds; Turkey, Gazprom, TAQA, Qatar still see demand

By Christine Van Dusen

Atlanta, Dec. 8 - Emerging markets assets had a somewhat slower and weaker session - but still saw some buying - on Thursday after the European Central Bank cut its key lending rate by a quarter of a percentage point and seemed to reject the idea of boosting its bond-buying program to bail out debt-saddled euro zone countries.

In response, the Markit iTraxx SovX index spread widened 15 basis points.

"I am not sure who's driving the market weakness, as despite the Street selling, the client flow we see is still buying," a trader said.

Among the names to experience demand on Thursday were Turkey's banks, Russia's Gazprom, Abu Dhabi National Energy Co. (TAQA) and Qatar, he said.

"KazMunaiGaz once again is looking rich to Gazprom at 30 bps through, but then again South Africa sits 180 bps through TAQA," he said.

Taking a closer look at Turkey, there was a small positive surprise when industrial production numbers came in better than expected, a trader said.

"That's making the sovereigns hold on pretty well," he said. "Flow-wise on banks, we are seeing quite decent retail investor buying of Akbank's 2015s and Isbank's 2016s. We are left better buyers of Isbank."

From Russia, most of the activity was focused on quasi-sovereign banks, he said.

TAQA stands out

Among the recent new deals from emerging markets issuers, TAQA's 2017s continued to stand out.

On Thursday, the 2017s were trading at 100.03 bid, 100.23 offered while the 2021s sold at the same time were seen at 100.66 bid, 100.96 offered.

The $750 million issue of 4 1/8% notes due 2017 priced Dec. 5 at 99.502 to yield 4.233%. Also included in the deal was a $750 million tranche of 5 7/8% notes due 2021 that priced at 99.515 to yield 5.94%.

Bank of America Merrill Lynch, Mitsubishi UFJ Securities, RBS and Standard Chartered were the bookrunners for the Rule 144A and Regulation S deal.

Qatar bonds active

The recent $5 billion issue of senior notes due 2017, 2022 and 2042 from Qatar was also active on Thursday.

On Thursday, the 2017s were trading at par bid, 100.20 offered. The 2022s were seen at 101.60 bid, 101.90 offered. And the 2042s were trading at 103.62 bid, 104.62 offered.

The Rule 144A and Regulation S deal priced on Nov. 29 included $2 billion of 3 1/8% notes due 2017 that priced at 99.719 to yield 3.184% and $2 billion of 4½% notes due 2022 that priced at 98.951 to yield 4.630%.

The deal also included $1 billion of 5¾% notes due Jan. 20, 2042 that priced at 98.928 to yield 5 7/8%, or Treasuries plus 287.5 bps.

Mixed performance for IPIC

Also capturing traders' attention on Thursday was the recent issue of notes from Abu Dhabi-based

IPIC GMTN Ltd. The unit of Abu Dhabi's International Petroleum Investment Co. PJSC priced a $3.75 billion three-tranche offering of notes due 2017, 2022 and 2041 on Oct. 27.

The deal included $1.5 billion of 3¾% notes due 2017 that priced at 99.669 to yield Treasuries plus 262.5 basis points. On Thursday, the notes were trading at 99.12 bid, 99.52 offered.

The 5½% notes due 2022 totaled $1.5 billion and priced at 99.743 to yield Treasuries plus 312.5 bps. The notes were seen at 98.05 bid, 98.55 offered on Thursday.

And the third tranche - $750 million 6 7/8% notes due 2041 - priced at 99.097 to yield Treasuries plus 350 bps. On Thursday the notes were trading at 100.56 bid, 101.31 offered.

Barclays Capital, Goldman Sachs, JPMorgan, Mitsubishi UFJ Securities, Natixis and Societe Generale were the bookrunners for the Rule 144A and Regulation S deal.

Lima plans notes

In deal-related news, the City of Lima in Peru is planning an issue of Peruvian sole-denominated notes worth $500 million by 2013, a market source said.

The notes are expected to mature in 10 to 20 years.

Proceeds will be used to fund infrastructure projects.

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