Banks from Russia and Peru sell notes as sentiment wavers; EM trading volumes fell in Q2

By Christine Van Dusen

Atlanta, Aug. 23 - Russian Agricultural Bank and Peru's BBVA Banco Continental sold notes on Thursday, and two Asian issuers - Kaisa Group and Korea Hydro & Nuclear Power - advanced deals as emerging markets investors went from optimistic to concerned over the course of the session.

Wednesday's news that the United States could institute further quantitative easing gave risky assets a boost that afternoon and on Thursday morning.

"The market saw a highly positive background," according to a report from UFS Investment Co. "Almost all risky assets and commodities showed considerable growth in the morning."

Russia's 2030 bonds, for example, climbed 0.8%, "closely approaching all-time maximums," the report said.

But as the day went on and some positive economic data was released, investors reconsidered.

"Despite Fed minutes we still doubt that at the conference in Jackson Hole on August 30 [the Fed] will clearly signal new quantitative easing in September," UFS said. "We think it will cause strong investor disappointment and a temporary decline in the market."

Still, some emerging markets bonds managed to put in a fairly good showing in the secondary market on Thursday. African names, such as the Republic of Angola and Nigeria-based Access Bank plc, remained in favor.

In other news, trading volumes for emerging markets debt in the second quarter totaled $1.41 trillion, according to a report from trade group EMTA.

That's down from $1.58 trillion in the first quarter of this year and $1.70 trillion a year ago.

This decline reflects a growing buy-and-hold investor base for the asset class and that more assets under management have been assigned to long-only strategies instead of hedge funds, the report said.

Turnover in local market instruments totaled $987 billion in the second quarter, making up about 70% of the total reported volume. In the first quarter of the year, that number was $1.04 trillion. And in the second quarter of 2011, the total turnover was $1.21 trillion.

Lenders print notes

In its new deal, Moscow-based Russian Agricultural Bank priced a $150 million tap of its 5.298% notes due Dec. 27, 2017 at 105 to yield 4.238%, a market source said.

The notes were talked at a price in the 104.50 area.

Citigroup, JPMorgan and VTB Capital were the bookrunners for the Rule 144A and Regulation S deal.

Peru's Banco Continental sold $500 million 5% notes due 2022 at par to yield 5%, a source close to the deal said.

The Rule 144A and Regulation S notes - via BBVA, Bank of America Merrill Lynch and Goldman Sachs - were talked at a yield in the 5½% area.

Proceeds will be used for general corporate purposes.

Asian issuers plan deals

In other deal-related news, Chinese property development and investment holding company Kaisa Group tapped Citigroup to lead a roadshow in Singapore, a market source said.

No other details were immediately available on Thursday.

And nuclear power and hydroelectric plant operator Korea Hydro & Nuclear Power is planning a benchmark-sized issue of dollar-denominated notes.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Goldman Sachs and Samsung Securities are the bookrunners for the deal.

The subsidiary of Korea Electric Power Corp. (Kepco) is expected to price the notes next month.

Guangzhou deal oversubscribed

The final book for real estate company Guangzhou R&F Properties Co. Ltd.'s $238 million increase to its 10 7/8% notes due 2016 was $2.6 billion from 140 investors, a market source said.

The notes priced Wednesday at 97.061 to yield 11 7/8% via Citigroup, Standard Chartered and UBS in a Regulation S transaction.

About 90% of the orders came from Asia, and 10% came from Europe.

Asset and fund managers accounted for 61%, private banks 30%, banks 5% and insurance 4%.

Proceeds will be used to finance offshore expansion opportunities, for general corporate purposes and to fund the interest reserve account of the dollar notes, according to a company filing.

Hyflux, PKO Bank price

Market sources were also keeping an eye on the new notes from Singapore-based environmental solutions company Hyflux Ltd., which priced a S$100 million issue of 4.2% notes due Aug. 29, 2019 at par to yield 4.2%.

DBS was the bookrunner for the deal.

Poland's PKO Bank Polski priced a CHF 100 million add-on to its 2.536% notes due Dec. 21, 2015 at 100.25 to yield 2.457%, or mid-swaps plus 230.9 bps, a market source said.

UBS and Credit Suisse were the bookrunners for the notes, issued through funding vehicle PKO Finance AB.

The original CHF 400 million issue priced at par to yield mid-swaps plus 240 bps.

Angola, Access Bank up

African issues remained popular in trading on Thursday.

Angola's recent $1 billion issue of 7% notes due 2019, which priced on Aug. 14 at par, was trading Thursday at 104.50 bid, 105.25 offered after Tuesday's 104.25 bid, 105 offered.

VTB Capital was the bookrunner for the Regulation S deal.

"Angola traded with a 105 handle this morning before some selling late in the day," a trader said.

The notes from Access Bank, due 2017, mostly traded between 103 and 103.50 on Thursday after pricing on July 18 at par via Citigroup and Goldman Sachs in a Rule 144A and Regulation S deal.

South Africa, Egypt in focus

From South Africa, five-year credit default swaps ended Thursday at 145 bid, 149 offered.

Selling was seen for Investec Ltd.'s 2017 notes, which traded Thursday at 97.62 bid, 98.62 offered after being quoted Wednesday at 97.50 bid, 98.50 offered. The notes priced at 99.775 to yield Treasuries plus 310 bps.

Egypt's 2020 bonds were quoted Thursday at 101.50 bid, 103.50 offered. On Wednesday, the notes were seen at 101.25 bid, 103.25 offered on news that the sovereign is seeking a larger-than-expected loan from the International Monetary Fund.

Egypt's 2040 bonds traded Thursday at 94.12 bid, 96.12 offered after Wednesday's level of 93 bid, 95 offered.

Brazil bonds top traded

Among local markets debt instruments, those from Brazil were the most frequently traded in the second quarter of 2012, EMTA said.

Mexico was another front-runner, as was Russia.

"Other frequently traded instruments were securities from Turkey - $71 billion - and Singapore," the report said, noting that the latter sovereign saw trading volumes of $61 billion.

Eurobond trading totaled $419 billion in the second quarter, versus $481 billion a year ago. In the first quarter of 2012, the total was $531 billion.

About 57% of this activity focused on sovereign debt issues in the second quarter, down from 59% in the previous quarter.

Corporates, meanwhile, saw a trading total of $158 billion in the second quarter.

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