EM investors await word from Fed; spreads widen slightly; Bancomext, Socar consider deals

By Christine Van Dusen

Atlanta, Sept. 17 - Emerging markets bond issuers took a breather on Tuesday while the Federal Open Market Committee began its two-day meeting on economic policy and the current bond-buying program.

The day also saw slightly subdued trading, given the related moves in U.S. Treasuries and the news that Standard & Poor's was putting Bahrain Telecommunications Co.'s rating on negative watch.

"A combination of factors saw the market pull back a little today," a London-based trader said.

On Tuesday, Treasuries closed up at 2.84%.

"This move ... left the market a little exposed to the downside," he said.

But most spreads didn't make major moves on Tuesday. The Markit iTraxx SovX CEEME ex-EU index spread on Tuesday inched up 2 basis points to 222 bps over Treasuries. The Markit iTraxx Crossover index spread - seen Monday at 377 bps - barely widened to 378.5 bps on Tuesday.

Meanwhile, bonds from Turkey opened stronger on Tuesday, narrowing by as much as 2 bps.

"In Europe, we continue to prefer Romania's 2020s over the 2019s for a 35-bps pickup," a trader said.

The tone was a bit defensive among investors in Middle Eastern bonds, another trader said.

"Traded Abu Dhabi Commercial Bank and Emirates Islamic Bank 2023s throughout the day with retail investors and brokers," he said. "These bonds are popular with some at the moment."

In deal-related news, Mexico's Banco Nacional de Comercio Exterior, Sociedad Nacional de Credito, Institucion de Banca de Desarrollo's (Bancomext) and the State Oil Co. of the Azerbaijan Republic (Socar) were considering bond issues.

DEWA gets a bid

Dubai Electricity and Water Authority saw its 2015s and 2016s continue to get a solid bid, a trader said.

"This curve has steepened up nicely in the past month to six weeks," he said.

Perpetual notes from the Middle East saw buyers early in the session, but that faded as the day went on, he said. The perpetuals from Dubai Islamic Bank and Abu Dhabi Islamic Bank ended the European session lower by about a point.

"Good demand for Dar al-Arkan's 2015s throughout the day," the trader said. "Saw some nibbling on the long end of Qatar and DPWorld, despite the weaker U.S. Treasury market."

Batelco on ratings watch

Taking a closer look at Bahrain's Batelco, the telecommunications company was put on credit-watch negative after losing market share, seeing a reduction in margins and higher market competitiveness, the London trader said.

The company's rating could be cut to junk.

Batelco's 2020s closed at 89¼ bid, 90¼ offered, about 45 bps wider on the week or 55 bps wider on the month.

"All Bahrain hit on this news," he said.

Indeed, the sovereign's 2023s traded Tuesday at 99¼ after moving up to 100 1/8 on Monday.

Ruwais above reoffer

In other trading from the Middle East, the recent 2036 bonds from Abu Dhabi-based Ruwais Power Co. - a consortium led by Abu Dhabi National Energy Co. (TAQA) - were spotted Tuesday in the 101 to 102 range, a trader said.

The notes priced at par to yield Treasuries plus 233.3 bps with bookrunners BNP Paribas, Citigroup, HSBC, Mitsubishi UFJ, National Bank of Abu Dhabi and Standard Chartered Bank in a Regulation S deal.

The notes have traded between 99 and 104 since issuance.

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

South Africa bond weakens

From Africa, the recent 2025 bond issued by South Africa traded at 103 1/8, or Treasuries plus 267.5 bps, on Tuesday, a trader said.

The notes priced at Treasuries plus 315 bps.

"It's had a superb run, and maybe it's a little tired here," he said.

Africa in focus

The recent bonds from Mozambique-based Ematum - $500 million 6.305% notes due 2020 - traded at 92 on Tuesday after printing at 92.051 to yield 8½%, a trader said.

"Pretty much the reoffer level it printed at recently," he said.

BNP Paribas and Credit Suisse were the bookrunners for the Regulation S-only deal.

And Egypt saw some good bids, as did Morocco, he said.

Ukraine mostly unchanged

Looking to Ukraine, sovereign bonds have moved up only a tiny bit so far this week, said Svitlana Rusakova of Dragon Capital.

"Overall, the lack of positive macro catalysts is preventing people from buying aggressively, though this underperformance gap is increasing and mildly supportive," she said.

Corporate bonds from Ukraine have been mostly unchanged, she said, with Donbass Fuel & Energy (DTEK) 2018s trading in a broker auction at just below 921/2.

Bancomext, Socar ponder bonds

Mexico City-based, state-owned bank Bancomext is considering an issue of dollar-denominated bonds, a market source said.

No other details were immediately available on Tuesday.

And Baku, Azerbaijan-based Socar is looking to issue eurobonds.

"Investors are awaiting tomorrow's decision and we do not expect any major issues until at least Thursday," the analyst said.

Vimpelcom could issue notes

One trader was keeping an eye on Russia-focused VimpelCom Holdings BV, which is looking to raise a new loan to pay down its Wind Telecom debt.

"This is a long-awaited event," she said.

At a recent investor day, the company said it would maximize intercompany funding, restructure expensive debt and establish an in-house bank.

"The process may require the issuance of new debt, which would suggest further eurobond issuance may occur," she said.

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