Russia's UBRD prices bonds; tone improves but volumes, liquidity weak; Ruwais deal ahead

By Christine Van Dusen

Atlanta, June 25 - Russia's Ural Bank of Reconstruction and Development (UBRD) priced notes on a hectic Tuesday that showed an improvement in tone, even amid low volumes and weak liquidity for emerging markets assets.

"Our market feels more stable than yesterday," a London-based analyst said.

Long-dated sovereign bonds from Turkey were between 10 basis points and 20 bps tighter, and Abu Dhabi National Energy Co. (TAQA) saw some two-way flows, with some nibbling on its 2018s and 2023s.

"A very busy day, all told," a London-based trader said. "The market remains what I would class technically as 'all over the place.' Some positives and negatives at the moment. One plus side is that valuations look interesting."

US Treasuries lost some of their early gains on Tuesday, with the 10-year moving from Monday's 2.65% to a yield of 2½%, following reports that the United States' durable goods orders increased more than expected in May.

Meanwhile, perpetual notes from the Middle East continued to drop lower in trading, a trader said.

"Not surprising," he said. "Those with cash have bided their time well."

Abu Dhabi Islamic Bank's bonds closed at 96 bid, 97 offered after coming to the market at par. Dubai Islamic Bank's perpetuals, which also priced at par, closed Tuesday at 93¼ bid, 94¼ offered.

"I've seen some guys who have not been too active in the first quarter starting to dip their toes in," the London trader said. "Supply has been light of late. Against that, liquidity is awful, covers are miles away and, from what I can gather today, a couple of leveraged portfolios got the tap on the shoulder today to head for the exit."

Spreads widen

The Markit iTraxx SovX CEEME ex-EU index widened 22 bps from Friday to Treasuries plus 267 bps on Tuesday.

The Markit iTraxx Crossover index spread - seen Friday at 482 bps - moved out to 511 bps over Treasuries on Tuesday.

Dubai under pressure

In other trading on Tuesday, bonds from Dubai and its corporates were under pressure, a trader said.

"Dubai Electricity and Water Authority's 2016 is a bond I've always liked - a 31/2-year, decent credit, liked in the region," he said. "But it doesn't matter. It's 50 bps wider on the week, in the 109 to 110 context now."

The 2025 bond from Emirates airline traded at 88 on Tuesday.

"It came at 99.941 earlier this year," he said. "Two-way now."

Jafza widens

Some retail investors were interested in buying Emirates NBD's perpetuals and Aldar Properties' 2014s during the session. And the 2019 notes from Dubai's Jebel Ali Free Zone (Jafza) are 90 bps wider on the month.

"Jafza felt like there were a dozen sellers," he said. "Saw some bids wanted on Majid al-Futtaim Holdings and also on some bank names."

Qatar bonds move out

Bonds from Qatar were between 30 bps and 35 bps wider on the week, with the 2040s trading at 113½ bid, 115½ offered and the 2042s at 105¾ bid, 107¾ offered.

"Bahrain names have virtually checked out of the game, but we did some retail activity on Mumtalakat near 101 and Bahrain Telecommunications Co. in the high 80s," a trader said.

Cairo-based African Export-Import Bank's 2016s were trading Tuesday between 102 and 103, the trader said.

New deal from UBRD

In its new deal, Russia's UBRD priced a $68 million issue of 12% notes due 2018 at par to yield 12%, a market source said.

BCP Securities, BNP Paribas and Sberbank were the bookrunners for the deal.

Ruwais markets dollar notes

Abu Dhabi-based Ruwais Power Co., a consortium led by TAQA, will set out on a roadshow this week for an $825 million issue of notes, a market source said.

BNP Paribas, Citigroup, HSBC, Mitsubishi UFJ, National Bank of Abu Dhabi and Standard Chartered Bank are the bookrunners for the deal.

The proceeds will be used to finance the Shuweihat 2 independent water and power project.

Magyar gets downgraded

Some market sources were keeping an eye on Hungary-based Magyar Telecom BV after Standard & Poor's downgraded the telecommunications company's long-term credit rating from CC to D on Monday.

This followed the company's decision to not make the June 15 coupon payment on its €350 million senior secured notes within a five-business-day grace period that expired on June 21, according to the agency.

Thus, the downgrade was "not surprising" but "compounded the negativity" during that day's session, according to a report from Erste Group Research.

"Opportunistic buyers returned in the afternoon with a focus on shorter-dated maturities," the report said. "This will likely be the basic tenet for the time being."

On Tuesday, most other bonds from Central and emerging Europe started off on the stronger side.

Turk Ekonomi places bonds

In other news on Tuesday, Turkey's Turk Ekonomi Bankasi AS placed €125 million bonds at Euribor plus 2.1% and $65 million at Libor plus 3.4%, with both due 2023, according to a company release.

The Istanbul-based lender privately placed the bonds with European investors.

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