Colombia's ETB plans notes as spreads, prices weaken a bit; Zambia stands out in trading

By Christine Van Dusen

Atlanta, Jan. 4 - Emerging markets assets finished the shortened week with solid demand, even as spreads and prices took a small hit on the overnight move in U.S. Treasuries.

The Markit iTraxx SovX index spread tightened by 1 basis point on Friday after Thursday's 1 bp narrowing. The corporate index - which on Thursday tightened 5 bps - was wider on Friday by 2 bps.

Against this backdrop, Colombia's Empresa de Telecomunicaciones de Bogota (ETB) was planning an issue of dollar- or Colombian peso-denominated notes worth up to $300 million. A roadshow is expected to take place soon.

In trading, corporate issues from Turkey were 4 bps to 8 bps tighter.

"Some of the lower-yielders in Russia have traded at last night's bid side," a London-based analyst said, pointing to names like OAO Novatek, Sberbank and VTB Bank. "But there's no rush to sell."

Bonds from Africa also had a solid week, a trader said, with Zambia trading at 101 bid on Friday after a level of 99½ before Christmas.

Ghana, which had been trading in the low 115s, was at about 116½ bid by Friday.

"Nigeria has been brutally squeezed, with the 2021 now trading with a 119 handle," he said. "As such, GTB Bank and Access Bank are seeing solid bids."

Access Bank's notes are about 90 bps to 100 bps tighter on the month.

In other news, emerging markets bond funds saw more than $1 billion in inflows for the week ended Jan. 2, according to a report from data-tracker EPFR Global.

EM bond funds popular

Bond funds attracted a net $2.29 billion during the week, EPFR said.

"Over half of that flowed into emerging markets bond funds, which retained the momentum they built up during the final three months of 2012," the report said. "Investors kept faith with emerging markets, especially Asian ones."

Flows are expected to continue to grow for emerging markets bond funds, according to a report from Barclays.

"The compromise on the U.S. fiscal cliff and investor perceptions of reduced global macro tail risks set the stage for a positive New Year start to emerging markets," the report said. "EM local bonds, particularly among lower-yielders, may not rally as fast as other assets, but investors choosing bonds to express views on stronger EM currencies should cap yields."

Morocco 'solid'

In trading, Morocco's 2042s - which came to the market in December at Treasuries plus 290 bps - were at Treasuries plus 197 bps on the bid side early on Friday.

"It traded heavy on the break," a trader said. "About 93 bps, or 8½ points on a 2042 dollar issue in a month. Very solid effort."

And Morocco's 2022s were seen Friday at Treasuries plus 178 bps bid after pricing in December at Treasuries plus 275 bps.

"Super impressive," he said. "But many accounts are familiar with the name from the loan days, the 2042s are only $500 million and the free float is disappearing."

Africa in focus

From Africa, Angola's notes were seen trading with a 113 handle by the end of the week. And Egypt bounced back, a trader said.

South Africa's 2024 bonds were 15 bps tighter on the month, he said.

"There's definitely some paper around, but even that credit on the month has done OK," he said.

The sovereign's 2042s on Friday were trading at Treasuries plus 200 bps on the bid side after pricing at Treasuries plus 290 bps.

ADIB active

The perpetual notes from Abu Dhabi Islamic Bank traded Friday at 107 bid, 108 offered after Thursday's levels of 107½ bid, 108¼ offered.

The sukuk 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 deal.

The final book was $15.5 billion.

And the 2017 notes from Dubai-based DPWorld were quoted at 113 3/8.

On Thursday the notes were trading in good size at the 113¼ to 113¾ level, a trader said.

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