Hana Bank, Banco de Galicia print bonds; volumes vary but risk appetite remains strong

By Christine Van Dusen

Atlanta, April 28 - Emerging markets assets saw a healthy level of activity on Thursday, even as volumes remained touch-and-go and issuance was light following the Federal Reserve's press conference and in advance of the expected slowdown related to the royal wedding in England.

Against the backdrop of the Fed's news that it would cease its bond-buying program and not take other steps to inspire economic growth, issuers like South Korea's Hana Bank and Banco de Galicia y Buenos Aires brought new deals to market.

"We've had quite good activity in such a thin market today," a London-based trader said.

The JPMorgan Emerging Markets Bond Index Plus spread was 3 basis points tighter at Treasuries plus 265 bps after a Wednesday that saw most sovereign spreads narrow. The exceptions were Argentina, which stayed flat that day, and Venezuela, which widened by 5 bps.

In trading on Thursday, retail interest was seen for Turkey's Turkiye Garanti Bankasi AS (GarantiBank) and Russia's Alfa Bank.

"It's sort of the perfect storm," said Enrique Alvarez, a debt strategist with think tank IDEAglobal. "The Federal Reserve hasn't left us with anything new, so we're now repeating the same type of risk accumulation story that has been a tailwind over the last couple of months."

Volumes inconsistent

But volumes continued to undulate, he said.

"It's touch and go," he said. "I think there's been a lot of reaction to the Fed's inaction yesterday and that comes and goes in waves. Then we see everything taper off and we have again a more lateral drift."

Most prices in EM opened ¼ to ¾ of a point firmer on Thursday, a London-based market source said.

He was keeping an eye on Belarus, noting that the sovereign's 2018 dollar notes were holding firm. "They're just under 11%," he said.

The source also was interested in the recent deal from Indonesia, a $2.5 billion issue of 4 7/8% notes due May 5, 2021 that priced Wednesday at 98.254 to yield 5.1%.

Deutsche Bank, JPMorgan and UBS were the bookrunners for the Rule 144A and Regulation S deal.

"Indonesia printing $2.5 billion 10-year notes at 10 bps inside of Turkey confirms how much the market loves sovereign benchmark risk," he said. "Turkey, meanwhile, is trading well on the back of a firm currency."

Turkey in focus

Taking a closer look at Turkey, better buying was seen for lender GarantiBank's 2021s, a $500 million issue of 6¼% notes that recently came to the market at 98.086 to yield 6 3/8% via Deutsche Bank, Goldman Sachs, JPMorgan and Standard Chartered Bank.

On Thursday the notes were seen at 99.50 bid, 99.75 offered.

"We've seen some good retail interest," a trader said.

Better selling was seen for construction company Yuksel Insaat AS's 9½% notes due 2015, which priced at 98.069 to yield 10% with bookrunners BNP Paribas and Standard Chartered.

The notes traded Thursday at 95.75 bid, 96.50 offered.

Russian banks perform

In other trading, Russia's banks had a solid day, a market source said.

"Russian banks were supported quite well today, despite the thin market ahead of the royal wedding tomorrow," he said.

Alfa Bank's 2021 notes saw interest from the retail side. The bonds priced April 19 at par to yield 7¾% with leads Goldman Sachs, UBS and Alfa Bank. On Thursday, the notes were trading at 101.062 bid, 101.312 offered.

And the 6.2% notes due 2014 from lender OJSC Promsvyazbank, which priced at par on April 15, were seen at 100.20 bid, 100.70 offered on Thursday.

LatAm sees demand

Several Latin American issuers benefitted from investors' desire to accumulate risk, including Venezuela and recent laggard Peru.

"Peru has been an underperformer for a number of weeks here," Alvarez said. "We have a sort of strong headwind coming from the political environment and the presidential run-off."

In terms of issuance from Latin American sovereigns, the scene was fairly quiet on Thursday.

"The new issue calendar has taken a bit of a breather," a New York-based trader said. "Spreads were unable to hold on to yesterday's tightening but the tone was still firm overall."

Said Alvarez: "There's been a very moderate size of issuance here for Latin America. There's not much pressure to issue due to the fact that the fiscal backdrop, for the most part across the region, looks relatively supportive of overall finances. So while we have fiscal numbers that are relatively positive, there's less of a push or an obligation to issue."

In trading, the 2021 5¾% notes from Brazil-based petrochemical company Braskem SA that priced April 6 at 98.14 to yield 6% bounced back.

"They've made a nice comeback," the trader said. "They are almost back to their issue spread after trading as wide as 257 back on April 12."

Hana Bank, Galicia sell notes

In its new deal, South Korea-based lender Hana Bank sold $500 million 4% 5.5-year notes at 99.439 to yield 4.115%, or Treasuries plus 205 bps, a market source said.

Barclays Capital, Citigroup, Hana Daetoo Securities, HSBC and Standard Chartered were the bookrunners for the Rule 144A and Regulation S offering.

A similar issue of notes - which had been whispered at the Treasuries plus low 200 bps area - was postponed earlier this month due to market conditions.

The day also saw Argentina's Banco de Galicia y Buenos Aires sell $300 million notes due 2018 at par to yield 8¾%, a market source said.

The notes priced below talk, which was set at 8 7/8%.

UBS and Deutsche Bank were the bookrunners for the notes, which are non-callable for three years.

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