Emerging markets await Greek vote; spreads tighten but volumes light; Tranka Kabel cancels

By Christine Van Dusen

Atlanta, June 21 - Though spreads tightened on Tuesday and some bonds performed well - including those from Qatar Gas Transport Co., Dubai and South Africa - most emerging markets issuers and investors were holding their collective breath on Tuesday in anticipation of the post-close confidence vote for Greece.

"As there is no significant data to be announced this week, the main focus will be on the Greek confidence vote at 9 p.m. London time and the FOCM meeting where the Fed is expected to announce its new support program," a London-based trader said. "Corporate debt overall is underperforming and the broader reticence to own bank risk still remains."

Against this backdrop, Czech Republic-based CEZ AS announced the settlement of its issue of 10-year notes and Seoul-based Korea Housing Finance Corp. mandated bookrunners while Indonesia's PT Tranka Kabel postponed its planned bonds.

"With the Greece confidence vote not out until 9 p.m. London time tonight, we're due another day with thin volumes today," another trader said. "Still, with the initial shock having passed, many prices are opening firmer today, with some liquidity returning to brokers' screens. I am impressed with the market's confidence in the EU's ability to resolve this problem."

The JPMorgan Emerging Markets Bond Index Plus spread closed 8 basis points tighter at Treasuries plus 298 bps, with Argentina tighter by 26 bps, Venezuela by 29 bps and Ukraine by 14 bps.

"Spreads, for the most part, are closing 5 to 10 bps tighter," a trader said.

CEZ prices notes

On Tuesday, Czech Republic-based utility company CEZ received the proceeds from its €100 million notes due June 21, 2021, which priced Monday at par, a market source said.

Barclays Capital was the bookrunner for the private placement of notes, which has an inflation-linked coupon. The company said that a related swap transaction was executed, converting the coupon into a nominal level and enabling CEZ to effectively pay a fixed rate.

Also on Tuesday, Seoul-based Korea Housing Finance mandated BNP Paribas, Nomura and Standard Chartered Bank for a dollar-denominated issue of notes, a market source said.

The Rule 144A and Regulation S transaction will be marketed during a roadshow in Asia, Europe and the United States.

Tranka Kabel postpones

The day also saw Indonesia's Tranka Kabel postpone its planned issue of five-year dollar-denominated notes due to market conditions, a market source said.

"While investors from both Europe and Asia provided favorable feedback on the company's credit, market conditions have been extremely volatile and have not been conducive to a new issue," the company said in a statement.

BNP Paribas and DBS Bank were the bookrunners for the Regulation S-only notes, which were to be non-callable for three years.

Proceeds were to be used for the repayment of existing debt of about $135 million, for funding the interest reserve account and for general corporate purposes.

The notes were talked at the low 14% area and were guaranteed by PT Aluco, a copper and aluminum rod fabricator based in West Java, Indonesia.

Dubai, Abu Dhabi tighten

In trading on Tuesday, Dubai opened 3 bps to 5 bps tighter while Abu Dhabi narrowed by 2 bps to 3 bps, a trader said.

Qatar Gas Transport Co. was particularly popular, while the Emirate of Ras al Khaimah was very illiquid and Saudi Arabia was holding steady, he said.

"The Middle East continues to be a beacon of stability, although the endless selling we have from clients is not consistent with the strength of the market," a London-based trader said.

The 2016 notes from HSBC Bank Middle East - which priced at par on May 26 - were trading at 101.50 bid, 101.75 offered.

"We're still seeing good two-way interest on this bond," the first trader said. "It's a nice defensive bond that is getting taken down. It's 6 bps tighter versus launch, but it feels like a lot more than that."

Turkey firms

Turkey opened Tuesday firmer, with the long end of the sovereign curve 5 bps tighter.

"Shorts are covered in the morning," he said. "Now activity has dampened again with investors waiting for the Greek vote."

Better buying was seen for Turkey-based Turkiye Garanti Bankasi AS' 2021 notes, which came to the market at 98.086 on April 14. The notes were trading Tuesday at 96.75 bid, 97.375 offered.

"Part of me still thinks letting go of paper in the upticks makes sense," a trader said. "I'm also finding it fairly easy to buy inventory rather than sell it, at least as far as accounts are concerned."

South Africa paper active

Looking to the African continent, South Africa's corporates were still heavy.

"But the sovereign debt is gilt-edged right now," a trader said.

Senegal's cash price continued to come off, he said, while Nigeria held firm and GTB Finance BV was quiet.

Meanwhile, Ukraine saw demand.

"Every day, once the U.S. comes in, this name sees a wave of buying," he said.

BTA bounces

Also in focus on Tuesday was Kazakhstan's BTA Bank, which said that it will be able to pay its debts on time after previous uncertainty on the topic.

The company's 2018 notes started the day at 70.50 to 72.50, with some contagion spreading to other Kazakhstan banks. But as the European session went on, the notes ticked up.

"BTA finally bounced from 71 to 74 after a press release confirmed their ability and intention to pay the pending coupons," a trader said. "Flow here is dominated by retail, with the bigger accounts sitting it out for now."

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