Emerging markets CDS ease, cash mixed; TAQA prices $1.5 billion; Hutchison holds at issue

By Paul A. Harris

St. Louis, Sept. 9 - Credit default swaps on emerging markets issuers ended the U.S. session 1 to 3 basis points wider, according to a New York-based trader who focuses on Asian fixed income.

Cash bonds ended the session mixed, from 3 bps tighter to 3 bps wider in investment grade names.

"There is continued strength in investment-grade sovereigns which are up ½ point to 1 point today," the trader added.

In the primary market Abu Dhabi National Energy Co. (TAQA) priced $1.5 billion of notes in two tranches.

TAQA atop tightened talk

TAQA priced $1.5 billion of notes (Aa2) in two tranches on Wednesday.

The company priced $1 billion of 4¾% five-year notes at a 250 bps spread to Treasuries. The spread came on top of price talk that had tightened by 12.5 bps from original talk of Treasuries plus 262.5 bps.

TAQA also priced $500 million of 6¼% 10-year notes at a 287.5 bps spread to Treasuries, also on top of price talk that had been tightened by 12.5 bps from Treasuries plus 300 bps.

BNP Paribas, HSBC, Mitsubishi UFJ Securities, Morgan Stanley and Standard Chartered Bank were joint bookrunners.

The issuer is 72.1% indirectly owned by the government of Abu Dhabi.

Markets strong, offers scarce

A New York-based trader who focuses on Asian fixed income saw good demand for Malaysian and Korean investment-grade paper from a variety of different accounts on Wednesday.

"Sovereigns trading like gold right now," said the trader, who added that among non-investment grade sovereigns, Philippines has rallied 2 to 2.5 points in the past week while Indonesia has rallied almost 3 points during the same period.

"Markets are strong and offers are scarce," the trader said.

Hutchison keeps at issue

The Hutchison Whampoa Ltd. bonds which priced on Tuesday in a $3 billion two-part deal were holding in at issue price, the trader said.

The $2 billion of 4 5/8% six-year notes, which priced at Treasuries plus 227.5 bps were at 227 bps bid, 223 bps offered, heading toward the New York close. Earlier in the day the notes were as tight as 216 bps bid.

The $1 billion of 5¾% of 10-year notes which priced at Treasuries plus 335 bps, were at 235 bps bid, 231 bps offered.

The deal tightened in Asia on Tuesday, but didn't break for trading in the United States until Wednesday, the trader said.

"It was evidence that there is pretty strong demand for investment-grade product, although there has been a little slippage," the trader said, noting that both tranches were trading around issue price.

Primary market announcements

Meanwhile a series of other deals were announced.

Mexico's Corporacion GEO SAB de CV mandated Morgan Stanley and Banco Santander to lead a dollar-denominated offering of five-year senior notes (expected ratings Ba3/BB-/BB-).

Roadshows commence on Monday, with presentations in Singapore and London.

Elsewhere Brazil's Banco Cruzeiro do Sul SA set price guidance at 8½% for its $150 million offering of three-year notes (expected Ba2) on Wednesday.

Books are set to close on Thursday.

The Brazilian banking company will use the proceeds for general corporate purposes.

Meanwhile Romania mandated Deutsche Bank, HSBC and EFG Eurobank to lead a benchmark-sized, euro-denominated bond offering.

The deal is expected to be completed before the end of the year.

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