'Feeding frenzy' for EM bonds; VEB, Finansbank, ADIB stand out; CorpBanca plans notes

By Christine Van Dusen

Atlanta, Jan. 3 - Still glowing from Wednesday's rally off the news of a fiscal-cliff agreement, emerging markets assets on Thursday saw tighter spreads and rampant demand, particularly for notes from corporates in Russia, Turkey and the Middle East.

The Markit iTraxx SovX index spread was 1 basis point tighter while the corporate index narrowed by 5 bps.

"Strong start to the year for EM bonds," a London-based analyst said. "Good spread compression as demand from accounts continued."

Standouts in the secondary market included Russia's Vnesheconombank (VEB), VTB Bank, Rosneft and Gazprom.

Liquidity was thin on Thursday on the offer side, a trader said.

"The general theme remains, with buyers of anything 'yield-y' and anything with duration," he said.

From Turkey, Finansbank's 2016s were trading up 1½ points.

"Feeding frenzy today," a London-based trader said. "Really no stone left unturned as dealers jump and leap over each other to replace inventory."

This could lead to a bump in issuance, he said.

"All new issues seem to do is re-invigorate curves," he said. "Case in point is International Petroleum Investment Co. (IPIC), Abu Dhabi National Energy Co. (TAQA) and Qtel International at the back end of last year."

IPIC's 2023 notes were seen Thursday at 104 5/8 bid while Qtel's 2023s were holding at 100¼ bid, 100½ offered.

TAQA's notes are about 35 bps to 40 bps better on the month, the London trader said.

In deal-related news, Chile-based financial institution CorpBanca SA is planning a dollar-denominated issue of senior notes.

CorpBanca deal ahead

Citigroup and JPMorgan are the bookrunners for CorpBanca's deal, which is Securities and Exchange Commission-registered.

The proceeds will be used for general corporate purposes, primarily to fund lending activities.

"Until we see some new issue supply next week, it seems easy to push spreads tighter at the start of the year here, with lots of cash around and the stock market euphoria helping feed the buy frenzy," the London analyst said.

ADIB continues run

In trading, the perpetual notes from Abu Dhabi Islamic Bank (ADIB) remained in focus on Thursday, trading at 107½ bid, 108¼ offered after Wednesday's close of 107 1/8 on the bid side.

"What a run from this bond, and still seeing demand," a trader said.

The notes recently priced at par with Abu Dhabi Islamic Bank, HSBC, Morgan Stanley, National Bank of Abu Dhabi and Standard Chartered Bank in a Regulation S-only sukuk deal.

The final book was $15.5 billion.

"Elsewhere, Kipco's 2020 marches higher, even though the 2016s are offered," he said.

Burgan, DEWA, SECO in focus

Kuwait-based Burgan Bank's notes were also well supported, and demand was sighted for Dubai Electricity and Water Authority (DEWA) and Saudi Electric Co. (SECO).

DEWA's 2015s were spotted Thursday at 113.37 bid, 113.87. The company's 2020s traded at 123½ bid, 124¼ offered.

SECO's 2017s traded Thursday at 103.05 bid, 103.35 offered while its 2022s were seen at 108 bid, 108.30 offered.

"We're actually seeing demand on virtually everything, especially Dubai peripherals like Emaar Properties, Majid al-Futtaim Holdings, Emirates Airlines and even the banks," a trader said. "Firm tone."

DPWorld's 2017 notes were trading in good size at the 113¼ to 113¾ level, he said.

Lebanon sees buyers

Looking at Lebanon, the sovereign saw some real-money buyers of its bonds on Wednesday but on Thursday had little trouble replacing inventory, a trader said.

"I think this, versus peers, looks OK," he said. "The initial theme this year has been a move to the higher-yielding sovereigns, and in this environment Lebanon looks OK."

Overall, though, the credit is "misunderstood," he said.

"I know Dubai obviously has had a staggering run and has benefitted massively over recent years from what has occurred in the region," he said. "But a year ago Lebanon's 2020 was 120 bps through Dubai's 2020. Now? Dubai 2020 is 190 through Lebanon 2020. Stunning move."

Demand for African bonds

After Wednesday's quiet session for African credits, solid demand was sighted for the region's sovereign bonds on Thursday, a trader said.

"Namibia, Zambia, Nigeria, Ghana, Angola - you name it, they're all trading higher," he said. "Nigeria bank paper is popular but tricky to find. Angola just traded at 113, 50 bps tighter on the month."

Morocco's 2022s traded at 104¼ to 1041/2.

"As we know, when Africa is bid, it's bid," he said.

From South Africa, Investec Ltd. traded at par while buyers were spotted for Eskom Holdings.

"A good amount of South Africa's 2024s went through at 113," he said.

© 2015 Prospect News.
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