Korea Finance, Intercorp Retail price bonds on cautious day for EM assets; IPIC tightens

By Christine Van Dusen

Atlanta, Nov. 8 - South Korea-based Korea Finance Corp. and Peru's Intercorp Retail Trustee sold notes on a Tuesday that saw emerging markets investors staying cautious about the European economic crisis.

"Business sentiment and financial markets stand at a dangerous and pivotal point as it remains unclear whether the near-term outlook is for a rebound similar to 2010 or a dangerous spiral as in 2008," according to a report from Barclays Capital. "Euro-area political turmoil, combined with the rising cross-market correlation with periphery spreads, serves as a very worrying warning indeed."

In response, volumes were thinner and activity slowed for emerging markets assets, though the news that Italy prime minister Silvio Berlusconi may resign offered a glimmer of hope that change is on the horizon for the debt-saddled sovereign.

"It's a fairly quiet start. However, with U.S. Treasuries leaking lower and stocks largely in the black, the tone is supportive," a trader said.

Indeed, the recent $3.75 billion three-tranche issue of notes due 2017, 2022 and 2041 from Abu Dhabi-based International Petroleum Investment Co. was slightly tighter on Tuesday.

"The 2017s seem to have a good feel and will optically be a nice, straight five-year deal in a few months," he said. "That's a key sweet-spot for locals."

Versus the launch spread, the 2041s have done well, followed by the 2021s, another trader said.

"Clearly the 2041s were cheap, but they won't have a natural bid like the 2017s will," he said. "I'd expect the 2022s to catch up a little here. However, it also has to contend with 2020s and 2021s for market love."

Qatar names solid

In other trading from the Middle East, bonds from Qatar had a solid bid on Tuesday.

"That's especially true for the slightly off-the-run names like Qtel International," a trader said. "There are still plenty of holidays around, so there remains the thinness in the market. But oil at 96.25 is still pretty supportive for Russia and the Middle East."

The recent issue of notes from Abu Dhabi-based Union National Bank PJSC - $400 million 3 7/8% bonds due 2016 that priced on Nov. 2 at 99.05 to yield 4.087% - opened on Tuesday at 98.87 bid, 99.07 offered.

By midday in Europe, the notes were trading at 99.06 bid, 99.18 offered.

"It's not racing away but I suspect over time this one will be OK, once the loose bonds are mopped up," a trader said.

Middle East in focus

Some demand was noted for names like Kuwait's Kipco and Dar al-Arkan, a trader said.

"Kipco feels hard to source and both bonds have had a great run this past month," he said.

Dubai Water and Electricity Authority's 2020 bonds printed at 103 during the afternoon.

"That's another solid mover over the past four weeks," he said. "But interestingly enough, finally the DEWA 2016s are lagging the 2014s and 2020s, having traded so rich for so long."

Overall, trading in the Middle East was moderately active given the holiday.

"It's interesting to see some of the sukuks trading a little heavy," he said. "They are still a stable beast. So while outperforming in a down market, they are tending to underperform versus higher-beta names over this past month."

Turkey sees low volumes

Looking to Turkey, most corporate and benchmark bonds started the day unchanged, a trader said.

"Low volumes and few prints are going through, but banks are generally well supported," he said. "Also, Fitch issued an upbeat report on Turkish banks, stating they're still resilient despite the uncertain macro environment."

He noted better buying of Garanti Bankasi AS' 2021s.

Meanwhile Russia's 2030s were trading up, seen with a 119 handle, while quasi-sovereign bonds were mostly unchanged.

"It's a fairly slow start," he said. "It's generally quiet. The Gazprom curve is supported well on the belly of the curve while Gazprombank has better sellers around."

Russian corporates, meanwhile, were strong.

"They're generally 15 bps to 20 bps tighter with the bellwether Vimpelcom and Evraz Group seeing the majority of the activity," he said.

Korea Finance prints notes

In its new deal, South Korea-based Korea Finance priced a $750 million issue of 4 5/8% notes due 2021 at 99.699 to yield Treasuries plus 265 bps, according to a company filing.

Bank of America Merrill Lynch, Credit Suisse, HSBC, RBS and Daewoo Securities were the bookrunners for the Securities and Exchange Commission-registered notes.

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

The notes are part of the company's $5 billion shelf program.

Intercorp does deal

Also on Tuesday, Peru-based Intercorp Retail Trustee sold a $300 million issue of notes due 2018 at par to yield 8 7/8%, a market source said.

The notes priced in line with talk, set at the 8 7/8% area.

Bank of America Merrill Lynch and JPMorgan were the bookrunners for the Rule 144A and Regulation S notes.

The proceeds will be used to purchase a participation in a loan agreement and to make senior loans.

The notes are guaranteed by Intercorp Retail, a member of the Lima-based IFH Peru Ltd. group of companies, which focus on financial and commercial support services.

Sovereigns set price talk

In other deal-related news, the Dominican Republic set talk for its planned issue of $250 million notes at 6 7/8% to 7%, a market source said.

Citigroup and Deutsche Bank are the bookrunners for the Rule 144A and Regulation S issue.

And the Republic of Lithuania set price talk for its planned dollar-denominated offering of benchmark-sized notes at the Treasuries plus 400 bps area, a market source said.

JPMorgan and UBS are the bookrunners for the Rule 144A and Regulation S offering.

Brazil oversubscribed

The final book for the Federative Republic of Brazil's recent $1 billion add-on to its existing 5 5/8% notes due 2041 was about $6.5 billion, a market source said.

The notes priced on Friday at 114.7 to yield 4.694% via Barclays Capital and Bank of America Merrill Lynch in a Securities and Exchange Commission-registered deal.

On Monday, the sovereign priced another add-on, this time $100 million that came to the market at 114.7 to yield 3.106%. The deal's size now totals $2.925 billion.

Proceeds will be used for general budgetary purposes.

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