Fiscal-cliff talks spark EM investor optimism; liquidity 'dropping off'; Investec active

By Christine Van Dusen

Atlanta, Dec. 17 - Emerging markets investors on Monday were in fairly good spirits, optimistic that the fiscal-cliff negotiations will soon reach a resolution, but volumes remained thin as the holiday wind-down began.

The Markit iTraxx SovX index spread started Monday 1 basis point wider, as did the corporate index.

"Liquidity is definitely dropping off now, as more and more participants head on holidays," a London-based trader said. "The theme remains flattening as people chase yield and bonds get squeezed into year-end."

Case in point, he says, were the $1.25 billion 3 5/8% notes due 2023 that Abu Dhabi National Energy Co. recently priced at 99.404 to yield 210 bps over Treasuries.

"That's now at 102½ bid," he said.

Some selling was seen for some paper from Dubai, he said, while Dubai corporates like Jafza Holdings, Emirates and Emaar Properties were well supported.

"Long-dated Abu Dhabi names are still powering along, and spread moves are impressive," he said.

The recent notes from Qatar Telecom QSC (Qtel), issued through subsidiary Qtel International Finance Ltd., received some attention on Monday.

The company priced a $1 billion issue of 3¼% notes due Feb. 21, 2023 at 98.721 to yield 3.399%, or Treasuries plus 175 bps.

On Monday, the notes were trading at 99.95 bid, 100.20 offered.

Barclays, HSBC, Mitsubishi UFJ, Mizuho Securities, Morgan Stanley and QNB Capital were the bookrunners for the Rule 144A and Regulation S transaction.

Abu Dhabi Islamic Bank's recent $1 billion issue of 6 3/8% perpetual Islamic bonds that priced at par traded Monday at 105.5625 bid, 106.0625 offered.

Abu Dhabi Islamic Bank, HSBC, Morgan Stanley, National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S-only sukuk.

The final book was $15.5 billion.

IPIC in focus

In other trading, the notes due in 2018 and 2023 from Abu Dhabi's International Petroleum Investment Co. (IPIC) were in focus on Monday.

The €800 million of 2 3/8% notes due May 30, 2018 that priced at 99.583 to yield 2.459%, or mid-swaps plus 145 bps. On Monday they traded at 102.12 bid, 103.12 offered.

The €850 million 3 5/8% notes due May 30, 2023, which priced at 99.021 to yield 3.742%, or mid-swaps plus 195 bps, were trading Monday at 102¾ to 1033/4.

BNP Paribas, JPMorgan, National Bank of Abu Dhabi, Natixis, RBS and Unicredit were the bookrunners for the Regulation S-only deal.

Investec sees activity

Also receiving some attention in trading on Monday was South Africa-based Investec Ltd., which saw some decent two-way activity on its 2017 notes.

"Many are predicting this bond could be a nice little performer in the first quarter next year," he said.

From Russia, several corporate issuers saw spreads narrow.

"Today VEB, Sberbank senior, Rosneft and VTB are opening up tighter," a London-based analyst said.

Ukraine bonds move up

Meanwhile, bonds from Ukraine have been moving a bit higher, with the 2017s ticking up to 108½ bid, 109½ offered, said Svitlana Rusakova of Dragon Capital.

The sovereign's 2022s were better at 100¾ bid, 101¾ offered.

"Quasi-sovereign Naftogaz also rose," she said. The notes closed at 102¾ bid, 103½ offered.

Mironovskiy Hleboproduct SA's (MHP) bonds were in demand and traded at 104½ bid, 105½ offered. And Mriya Agro Holdings were quoted at 100½ bid, 102 offered.

"We also saw inquiries in less liquid names," she said.

Turkish banks upgraded

From Turkey, three of the country's largest banks - Turkiye Is Bankasi AS, Turkiye Garanti Bankasi and Akbank TAS - received upgrades on their issuer default ratings, a London-based market source said.

All three were upgraded from BBB- to BBB.

"Yapi Kredi was affirmed at BBB, outlook stable," she said. "All four had their viability ratings upgraded to BBB, as we expected, which placed Isbank's subordinated debt in the investment grade category at BBB- from BB+, currently in line with Yapi Kredi subordinated debt."

Tier 2 instruments should receive solid support on the back of the upgrade, she said.

"Apart from a more positive market sentiment on the remaining banks' spreads, we do not expect major spread changes," she said.

BTA Bank plan approved

In other news, Kazakhstan-based BTA Bank's restructuring plan was approved by a financial court, the London analyst said.

"The restructuring will result in the bank's debt being reduced from $11 billion to $3.3 billion," she said. "The debt maturity will be extended to between three and 12 years."

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