Russia bonds tighten; Middle East long-dated notes in demand; China Taiping sets roadshow

By Christine Van Dusen

Atlanta, Aug. 27 – Russian spreads opened tighter on Wednesday and many bonds from other emerging markets saw solid demand as investors anticipated further quantitative easing in Europe and ignored increasing tensions in Russia and Ukraine.

Russian credit default swaps started the session about 4 basis points narrower, as did those from Turkey, a London-based analyst said.

“Peripheral Europe is seeing strong demand as well,” he said.

Tuesday’s talks between the leaders of Russia and Ukraine ended with an agreement to hold military consultations about the border, but the meeting otherwise produced few results.

“The Minsk talks did not result in anything tangible, at least on the surface, so the market will get back to its usual wait-and-see mode,” said Svitlana Rusakova of Dragon Capital.

The conflict continued on Wednesday, following the capture of Russian paratroopers in Ukraine.

“The prospect of sanctions by the West has increased yet once again,” the analyst said. “So overall, strong global markets are helping sentiment, but the Ukraine situation appears as tense as ever.”

The Russian sovereign’s 3½% 2019 notes that priced at 99.195 and traded 99.38 bid, 99.88 offered on Tuesday moved to 99.38 bid, 99.88 offered on Wednesday, a London-based trader said.

Russia’s 4 7/8% notes due 2023 that priced at 98.162 that traded Tuesday at par bid, 100½ offered were quoted Wednesday at 100.19 bid, 100.69 offered.

The 3 5/8% notes due in 2020 that priced at 99.533 and traded Tuesday at 101.62 bid, 102.12 offered were seen at 101¾ bid, 102¼ offered on Wednesday, he said.

Evraz bonds widen

In other news from Russia, steel producer Evraz Group SA reported first-half earnings results that beat expectations.

“A good beat from Evraz this morning, but as with all Russian corporates currently, company fundamentals and financial performance are taking a back seat to macro developments,” the analyst said. “Although not as strong as other Russian corporates, we feel Evraz’s liquidity position is sound and note that Evraz bonds have been amongst the weakest performers.”

The company’s 2015s have moved 170 bps wider and the 2017s 129 bps wider since sanctions were introduced by the United States.

“With tensions in the region expected to remain high, we expect Evraz bonds to remain volatile,” he said.

Middle East in focus

Looking to the Middle East, longer-dated bonds were the most popular, a London-based trader said.

Dubai Holding’s 2017s put in a solid day after lagging in previous sessions, closing up 50 cents on the day.

Two-way activity was noted for Abu Dhabi Commercial Bank’s 2023 notes, he said.

“I think that can tick up a little,” he said. “In the Abu Dhabi space, the redemption profile still is very supportive for asset prices and spreads.”

Bonds from Qatar received support during the session, he said, with the sovereign’s 2017s bid through swaps for most of the day.

“Dubai World said it had reached an agreement with the creditor committee to extend the repayment of $10 billion in debt, another small positive I suspect,” he said. “It clears an overhang of uncertainty from the market.

Roadshow for insurer

China Taiping Insurance Holdings Co. Ltd. will set out on Thursday to market a dollar-denominated issue of perpetual notes, a market source said.

HSBC Ltd. and Standard Chartered Bank are the joint global coordinators, joint lead managers and joint bookrunners. CCB International Capital Ltd. is also a joint lead manager and joint bookrunner. Taiping Capital Ltd. is a co-manager.

The proceeds from the Regulation S deal will be used for general corporate purposes.

China Taiping Insurance is an insurance conglomerate based in Hong Kong.

Ghana plans bond

Ghana is looking to issue a eurobond in September, a market source said.

No other details were immediately available on Wednesday.

In July, market sources were whispering about a possible issue of local-currency notes due in three years from the sovereign.

Buenos Aires shelves plans

The city of Buenos Aires is postponing plans for an issue of up to $890 million of notes as a result of Argentina’s debt default, a market source said.

No other details were immediately available on Wednesday.

Link REIT prints notes

On Tuesday, China’s Link Real Estate Investment Trust priced $500 million 3.6% notes due Sept. 3, 2024 at 99.286 to yield 3.686%, or Treasuries plus 130 bps, a syndicate source said.

Then notes priced tighter than talk, set at 145 bps.

ANZ, DBS and HSBC were the bookrunners for the Regulation S deal.

Link is a Hong Kong-based real estate investment trust that invests in retail and parking facilities.

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