New deals from India's Tata Group, Venezuela's CAF; spreads tighten; EM bond inflows rise

By Christine Van Dusen

Atlanta, April 5 - Tata International Singapore Pte. Ltd. and Venezuela's Corporacion Andina de Fomento (CAF) sold notes on a Friday that saw tighter spreads and frenetic trading activity for emerging markets assets.

"The markets are insane," said a New-York based trader, who focuses on Latin America.

The Markit iTraxx SovX CEEME ex-EU index spread narrowed on Friday by 4 basis points to Treasuries plus 207 bps. The corporate index tightened too, moving in 6 bps to Treasuries plus 237 bps.

After a whirlwind week of mostly buying, a quiet Friday morning soon gave way to a hectic pace in the secondary market. Most names held on to the previous days' gains, a London-based analyst said.

"We are seeing some buying coming in for Vnesheconombank's euro 2018s and 2023s as well as the dollar 2025s," she said. "Turkey's long end is marked up a little again."

Buyers were also seen for Turkey's Turkiye Vakiflar Bankasi TAO's (Vakifbank) 2022s and Turkey's Turkiye Is Bankasi AS' (Isbank) 2018s and 2022s.

For credits from the Middle East and North Africa, it was a solid week, particularly for the long end, the analyst said.

"Qatar's 2040s and 2042s are 15 bps tighter, despite the move to sub-3% on the long end," the she said.

Meanwhile, two Russian corporate issuers - lender OAO Nomos Bank and onshore and offshore drilling service provider Eurasia Drilling Co. Ltd. - prepared to issue notes this month.

In other news, emerging markets bond funds saw inflows of $872 million for the week ended April 3, up from $696 million the previous week, according to a report from data tracker EPFR Global.

Emerging Asia remains popular

Despite the tumultuous global backdrop, emerging markets investors stayed the course this week and continued to favor emerging Asia, EPFR said in its report.

"A potentially toxic mixture of North Korean threats, unorthodox policymaking in Japan and Eastern Europe and poor employment data on both sides of the Atlantic ushered in the second quarter," EPFR said in its report. "But investors and markets proved resilient."

Funds with local-currency mandates outgained their hard-currency counterparts by a smaller margin than was reported in previous weeks, EPFR said.

"Emerging Asia was again the preferred region, and China bond funds pulled in twice the amount absorbed by the next most popular country fund group, Malaysia bond funds," the report said.

Tata sells notes

In its new deal, Tata International Singapore - part of India's Tata Group - priced S$500 million 4.3% notes due April 11, 2018 at par to yield 4.3%, a market source said.

The notes matched price talk, set at 4.3%.

RBS was the bookrunner for the Regulation S deal.

The notes include a change-of-control put at 101 if Tata Group ceases to own at least 50% of the voting securities for Tata International Ltd.

Tata International is the trading arm of the Tata Group, a Mumbai-based company that focuses on manufacturing and supply chain integration.

CAF prints bonds

Friday also saw Venezuela-based lender CAF price a CHF 100 million increase of its existing 1 3/8% notes due Feb. 11, 2021 at 100.36 to yield 1.326%, or mid-swaps plus 50 bps.

Credit Suisse was the bookrunner for the deal.

The original CHF 250 million issue, which priced in January, came to the market at 100.094 to yield mid-swaps plus 55 bps.

Ukraine awaits IMF deal

From Ukraine, sovereigns ended the week a bit stronger despite local political turmoil and caution from investors, said Svitlana Rusakova of Dragon Capital.

"The best explanation probably is the anticipation of an International Monetary Fund deal and renewed EM hard-currency inflows. Lower US rates also help," she said.

Meanwhile, activity among corporate names in Ukraine was muted, she said.

Russian bonds stay strong

From Russia, sovereign bonds continued to experience solid demand at the end of the week.

"Russian eurobonds finished confidently up on Thursday, continuing with this week's strengthening and seemingly breaking the year-start's trend for the yield growth," according to a report from UFS Investment Co. "We expect demand for Russian eurobonds to continue increasing."

The bank was keeping an eye on the upcoming issue of notes planned by JSC Gazprom Neft, which is seeking to sell as much as $1 billion bonds this month.

"We think that the company will enter the market with a 7- to 10-year bonds at 3.9% to 4.3% per annum," the report said. "In our view, the company's eurobonds will again enjoy considerable demand."

Russian issuers plan deals

Also from Russia, Nomos Bank is looking to issue bonds sometime this month, a market source said.

And Russia-based drilling service provider Eurasia Drilling has mandated BofA Merrill Lynch, Goldman Sachs and Sberbank as bookrunners for a roadshow to market a dollar-denominated issue of notes, according to a company announcement.

The Rule 144A and Regulation S roadshow will begin April 8.

"The new bond will likely help the group to address its debt maturity profile given that it has $200 million due in 2013 and another $150 million in 2014," the London analyst said. "We view this company as an interesting addition to the Russian corporate space, which is likely to generate good interest, depending on pricing."

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