Emerging market debt up as equities rally; Rosbank prices $225 million five-year eurobond at 9¾%

By Reshmi Basu and Paul A. Harris

New York, Oct. 26 - Emerging market debt reversed fortunes Tuesday as U.S. equities surged on a rally among insurers.

The market was "a lot better today [Tuesday]," said a trader. "Much better bid. Brazil was up close to a point."

He added that there was a "generally better feel in the market today [Tuesday] - Asia was up, stocks are up, EM debt was up."

The Brazil C bond gained 3/8 to close at 98 3/8 bid while the bond due 2040 added 1.15 to 110¾ bid.

Russia's bond due 2030 was up a quarter of a point to 100¼ bid. The Venezuela bond due 2027 was up 0.85 to 101.20 bid.

"The market seemed like it was in a better mood," said a sellside source. "Equities were up a lot and that helped the tone of the market.

"I don't think there was any special driver - other than some recovery we've had in the last few days."

In trading, the Dow Jones Industrial Average was up 138.49 points to 9888.48 as investors grabbed insurance stocks.

Nonetheless, the tone in emerging markets is cautious leading up to the U.S. presidential elections, according to the trader.

"It's been a mix, both buyers and sellers out there. It hasn't been steady one way or the other."

Furthermore, the sideways trading will continue up until the elections, said the trader.

"It's going to be choppy up until then unless somebody knows decidedly which way it [the elections] will go - which I don't think is going to happen. It's going to pretty much stay in this range," he commented.

"I think the market wants certainty. Doesn't matter who wins. It just doesn't want it to be dragged on like the last election."

Quiet pipeline

The pipeline will remain quiet up until the Nov. 2 voting day, according to the sellside source.

"I think that in general, things are going to be quiet in our market until after the elections.

"November is sort of tricky because you have a lot of things going on calendar wise. You've got employment. You've got FOMC. You've got Veterans Day. You've got the elections and everything."

The non-farm payroll numbers come out on Nov. 5. The Federal Open Market Committee meets on Nov. 10.

And because of these different events in November, issuers will feel the time squeeze, according to the sellside source.

"I think you have a couple of windows that everyone is going to be forced into because of the different holidays," said the sellside source.

Looking ahead, Mexico said last week that it would tap the market, according to the source.

"I think people still think that Brazil will do something at some point. Turkey will still do something at some point. People are questioning Panama whether they will do anything."

The source added that those prospective issuers most likely would look at the market in November.

"I wouldn't expect them before November."

Rosbank prices

Rosbank, through its subsidiary Russia International Finance SA, priced a $225 million eurobond due 2009 at par to yield 9¾%, according to a market source.

The transaction is the country's first international bond to be backed by credit card receivables.

Credit Suisse First Boston and Merrill Lynch managed the sale.

And Export-Import Bank of Korea priced €300 million of floating-rate notes due 2009 (A3/A-) at 99.952 to yield Euribor plus 35 basis points.

ABN Amro and Deutsche Bank AG ran the deal.

Meanwhile, whether or not Germany will repackage more of Russia's Paris Club debt is anyone's guess - although rumors over recent days indicate there's plenty of guessing going on.

"I don't think anyone knows yet which way it's going to go," said the sell-side source. "I don't even think the Russians know which way it's going to go."

Few Latam corporate gainers

Latin American corporate paper was unchanged Tuesday. But there were some winners.

General Motors de Mexico's bond due 2008 gained two points to 104 bid, 106 offered while the bond due 2008 added five points to 95 bid, 97 offered.

Integrated steel company Altos Hornos de Mexico's bond due 2004 added 3½ points to 41 bid, 43 offered.

And Brazil's Braskem also gained. The petrochemical's company bond due 2008 was up ¼ to 113 bid, 114.80 offered.

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