Risk appetite rises on better economic data, but activity muted; Gazprombank plans notes

By Christine Van Dusen

Atlanta, Sept. 3 - Somewhat brighter economic data from the United States on Friday boosted investors' appetite for riskier assets and encouraged emerging market issuers to consider bringing deals - just in time for business to limp to a halt ahead of the Labor Day weekend.

"There's just been no real reaction," a London-based trader said. "My world is just kind of drifting home."

Though the Institute for Supply Management reported that non-manufacturing growth slowed in the United States in August, there was some not-so-negative news too: The economy lost far fewer non-farm jobs in the month than had been expected, and emerging market bond funds took in $707 million for the week ended Sept. 1, down from the previous week's $1 billion but still in positive territory.

"We've been waiting all week for non-farm payrolls, and now we have them and it's time to go home," a London-based trader said. "In a nutshell, the data came better than expected and certainly better than feared."

Trading thin

But the market didn't react strongly to the news, in large part because it was the Friday before Labor Day. "Nothing's really happening," the trader said.

Volumes for the day were "thin," a market source said.

"Because of the better data, risk is on, Treasuries are off and so we've seen a fractionally better bid in some things," he said.

But the difference is really "negligible," he said. "I think this is normal for this time of year."

After Monday's holiday, "people will get back to the calendar and back in the game," the trader said.

Among the issues that will be on that calendar is Russia-based joint gas industry bank Gazprombank's planned benchmark-sized add-on to its existing $500 million 6¼% notes due Dec. 15, 2014, a market source said.

Barclays and JPMorgan are the bookrunners for the Regulation S-only deal, for which the yield is set at 6.1%.

Korean issuers plan notes

Friday also saw some Korean issuers take steps toward the market.

Seoul-based lender Export-Import Bank of Korea (Kexim) is planning a $1 billion bond offering that is likely to price in the fourth quarter, a market source said. No other details were available on Friday.

And state-owned Korea Finance Corp. has mandated Barclays Capital, BNP Paribas, Citigroup, Credit Suisse and Korea Development Bank for a $750 million issue of notes, according to a filing with the Securities and Exchange Commission.

The proceeds will be used for general operations, including extending foreign currency loans.

In other news, the Republic of Slovenia announced it will not issue any more debt this year, according to a market source. The sovereign had been expected to issue up to €4 billion in bonds this year.

Slovenia last brought a deal to market in March, with €1 billion 2¾% notes due 2015 pricing at 99.453 to yield mid-swaps plus 37 basis points.

And the planned offering of bonds from Brazil's Suzano Papel e Celulose SA is expected to come to market before the end of the third quarter, a market source said.

No other details were available Friday.

Suzano is a pulp and paper company based in Salvador, Brazil.

Calendar grows

Also ahead is a dollar-denominated benchmark-sized offering of notes due October 2020 from Brazil-based telecommunications company Telemar Norte Leste. The Regulation S-only deal via Bank of America Merrill Lynch, BNP Paribas, BTG Pactual and Itau - which includes a change-of-control put at 101 - will be marketed on a roadshow from Sept. 6 to Sept. 8 and is expected to price soon after.

Another deal that's coming soon is Brazil-based business conglomerate Odebrecht Finance Ltd.'s planned $250 million perpetual step-up notes with Credit Suisse and Banco Itau. The Rule 144A and Regulation S notes are non-callable for five years, and the proceeds will be used to refinance the company's outstanding 9 5/8% perpetual notes and other debt.

Market-watchers are also on the lookout for the planned dollar-denominated notes from Seoul-based Korea Hydro & Nuclear Power Co., which will on Sept. 8 wrap up its roadshow with Bank of America Merrill Lynch, Citigroup, Deutsche Bank and HSBC Holdings.

Proceeds from the Rule 144A and Regulation S transaction will be used for general corporate purposes and to fund a three-month bridge loan.

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