Retail investors bolster EM as Greek woes send investors to safe havens; UNB sets talk

By Christine Van Dusen

Atlanta, Nov. 1 - Uncertainty about the European economic situation was renewed on Tuesday after Greece's prime minister decided to put the sovereign's bailout to a vote, a move that could negatively impact the European Union's plan.

"The specter of the euro area debt crisis returned to haunt markets," according to a report from Barclays Capital. "Against this fragile backdrop, we expect markets to remain firmly focused on political headlines out of Europe as well as key activity data for signs of global economic slowdown."

This, plus the layoffs in Credit Suisse's emerging markets practice and the "speedy demise" of MF Global "have all changed the mood," a London-based trader said.

"Spreads are a minimum of 25 bps wider," he said. "Cash bonds are underperforming."

So Ukraine's sovereign bonds started the day 50 bps wider and Russia's corporates 30 bps to 40 bps wider.

"Russian quasi-sovereigns are seeing more defensive pricing but not collapsing," another trader said.

Even Abu Dhabi's International Petroleum Investment Co. was not immune to the moves, with the curve marked 25 bps wider. By late morning, two-way interest was seen.

And near the end of the European session, the curve was steep but the notes were actively trading.

"Emerging markets aren't doing too bad," the London trader said. "Thankfully we still have retail buying or it would be a lot worse. This is all thanks to the power of retail. The retail investor still believes and is putting his money where his mouth is."

Turkey widens, weakens

Turkey's sovereign bonds were seen Tuesday morning between 15 bps to 25 bps wider, another trader said.

"That's broadly in line with the market," he said. "However, we are not asked much to bid so far."

By afternoon, Turkey's bonds were weaker across the board, in line with the broader market.

"However, the banks are very well supported on the Street," he said.

The recent issue of notes from Export Credit Bank of Turkey (Turk Eximbank) - $500 million of 5 3/8% notes due 2016 that came to the market on Monday at 99.49 - bounced back a bit on Tuesday morning.

"We're not seeing any of the last-in, first-out activity you'd have expected," he said.

Turk Eximbank tightens

By afternoon, the Turk Eximbank notes had tightened 25 bps versus the sovereign.

"Other Turkish banks are star performers at just 15 bps wider," a trader said. "Akbank papers and Finansbank saw better selling by retail investors today."

Better buying was noted for Garanti Bankasi AS' 2021s.

The trader was also keeping his eye on Albaraka Turk Katilim Bankasi AS, a Turkish bank owned by Bahrain-based Albaraka Banking Group BSC.

The company has mandated Deutsche Bank, Emirates National Bank, QInvest and Noor Islamic Bank as bookrunners for an offering of five-year sukuk notes, a market source said.

The notes are expected to total as much as $200 million.

LatAm prices rise

Looking to Latin America, prices were up between 3/4-point and 2 points on the long end for most sovereign names, a New York-based market source said.

"Brazil, Mexico, Pemex - they're all being viewed as kind of a safe haven, almost, and are pretty well bid," he said. "Spreads are wider but prices are trying to keep up with demand across the board."

New deal flow was at a standstill on Tuesday, he said.

"There's obviously not a lot of new issuance," he said. "There's a little bit of cash on the sidelines as people are flocking to the safety trade."

UNB gives price guidance

Also on Tuesday, Abu Dhabi's Union National Bank PJSC set price talk for its dollar-denominated offering of benchmark-sized notes due November 2016 at mid-swaps plus 287.5 bps, a market source said.

Citigroup, Deutsche Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank are the bookrunners for the Regulation S-registered deal.

And the Republic of Poland announced that the sovereign has no plans for further issuance this year, a market source said.

On Oct. 27 the sovereign priced a $2 billion issue of 5% notes due 2022 at 98.605 to yield 5.176%, or Treasuries plus 280 bps.

Citigroup, Deutsche Bank and HSBC were the bookrunners for the Securities and Exchange Commission-registered transaction.

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