Emirates sells notes amid unsettling U.S. data; EM investors buy Egypt, GTB, Senegal, HSBC

By Christine Van Dusen

Atlanta, June 1 - Dubai-based airline Emirates brought its highly anticipated issue of notes to the market on a Wednesday that saw solid trading activity for emerging markets assets, even as news reports from the United States increased investor concern about the global economy.

Treasury yields declined after the Institute for Supply Management reported a drop in manufacturing for April and ADP released its payroll figures for May, which showed that the country added just 38,000 new jobs during the month, far fewer than the expected 175,000 increase.

"Given the news, data flow and headwinds globally out there, this part of the world is trading pretty well," a trader said. "It's an active start to June."

Demand was seen for Egypt, Nigeria's GTB Finance BV, Senegal, HSBC Bank Middle East, Dubai and Bahrain.

"Whether you look at Dubai's regional demand, Belarus applying for IMF aid, or Turkey's better trade deficit, the glass is half-full today and prices in most assets are firmer," a London-based market source said.

In other news on Wednesday, several issuers advanced deals, including South Africa's FirstRand Bank Ltd., Korea Hydro & Nuclear Power and China's CLP Power Hong Kong Ltd.

Emirates beats talk

In its new deal, Emirates sold $1 billion 5 1/8% notes due June 8, 2016 at 99.904 to yield 5.147%, or mid-swaps plus 330 basis points, below price talk of 337.5 bps over mid-swaps.

Deutsche Bank, Emirates NBD, HSBC and Morgan Stanley were the bookrunners for the Regulation S notes.

"Nothing like a new deal to liven up the curve and comps, and that has been true with Emirates," a London-based trader said.

Earlier in the day, the notes - which sources said attracted more than $6 billion in orders - moved up between 25 cents and 75 cents in the gray market. "There are plenty of loose bonds, but it's ticking up on screens, slightly tighter versus Treasuries from launch, he said.

After pricing, the notes were seen at 100.15 bid, 100.30 offered and closed at 100.20 bid, 100.30 offered.

"There's very good two-way flow here, but mainly Street buying," a trader said. "The bond did trade down to re-offer once allocations came out, but once it opened at re-offer bid side the bond steadily ticked up. Let's see how she opens in the morning with some of the locals who were out the office are free to trade."

FirstRand gives guidance

In other deal-related news, South Africa's FirstRand Bank set price guidance for its planned $300 million issue of five-year notes at mid-swaps plus 262.5 to 275 bps, a market source said.

FirstRand Bank, JPMorgan, Mitsubishi UFJ Securities, Standard Chartered Bank and UBS are the bookrunners for the Regulation S notes, which are expected to price Thursday.

"Anything over Libor plus 250 bps would be attractive given how well South Africa is supported and how it trades in local markets," the London-based market source said.

Indeed, South Africa was very active on the open, particularly among corporate issues, a trader said. "A big wave of buying has gone through," he said. "That makes sense when you consider the demand out there for the new FirstRand deal."

Said a market source: "The FirstRand five-year notes are seeing great demand, which is also reflected in the South African sovereign curve, which is one of the few credits to perform in line with Treasuries today."

African issues see demand

Also from Africa, impressive demand was seen for Egypt, particularly the sovereign's 2020s and 2040s.

"The only problem is, spread-wise, they couldn't match U.S. Treasuries," a trader said.

He also noted that the recent issue of notes from GTB Finance BV, which came to the market on May 12 at 98.981, were trading at about 102.50 in the morning.

"And Senegal marches on," he said.

In other trading on Wednesday, the recent $500 million issue of 3.575% notes due 2016 from HSBC Bank Middle East - which came to the market on May 26 at par to yield mid-swaps plus 155 bps - opened at 101 bid, 101.12 offered.

"That's tighter by 11 bps versus the launch," a trader said.

Later the notes were trading at 101.06 bid, 101.25 offered. "The recent HSBC sukuk is doing very well," he said.

And the recent issue of notes from the United Arab Emirates' Sharjah Islamic Bank - $400 million of 4.715% notes due 2016 issued via SIB Sukuk Co. II Ltd. that priced at a spread of 270 bps over mid-swaps - were trading Wednesday at 101.93 bid, 102.18 offered after opening Tuesday at 101.65 bid, 101.95 offered.

Middle East mixed

Also from the Middle East, issues from Dubai saw solid interest and Street buying, as did names from Bahrain.

Qatar opened 1 to 2 bps tighter, struggling to keep up with the Treasury move. "Front-end Qatar is underperforming," the trader said.

And the recent notes due 2019 from Lebanon, an issue of $650 million 6% notes that priced at par, started the day at 100.05 bid, 100.20 offered and were later seen at 100 bid, 100.15 offered.

"We're seeing good demand on sukuks again," he said.

In other trading, Kuwait's Kipco saw better buying, Ukraine was firmer and Belarus rallied 1½ points on the possibility of more aid. "That seems optimistic to me, given how much work needs to be done getting their house in order," the London-based market source commented.

Asian issuers plan deals

From Asia, Korea Hydro & Nuclear Power - a subsidiary of Seoul-based Korea Electric Power Corp. (KEPCO) - has mandated Barclays Capital, Goldman Sachs, Morgan Stanley, RBS and Samsung Securities for a roadshow starting June 6, a market source said.

The marketing trip will travel through Singapore, Hong Kong, London, Edinburgh, New York, Boston, Chicago and Los Angeles.

And China-based electric company CLP Power Hong Kong has set the maturity at 10 years for its planned issue of dollar notes, a market source said.

Barclays Capital and Standard Chartered - as well as Deutsche Bank, HSBC and RBS - are working on the transaction.

'Crosswinds' for Latin America

Looking at Latin America, the tone was defensive on Wednesday and spreads widened, said Enrique Alvarez, debt strategist with think tank IDEAglobal.

"As far as debt goes, they're having to fly into the crosswinds because on one side you have the notion that we're getting softer global surroundings - especially on the manufacturing side, which tends to feed negatively into bond prices - but at the same time you have plunging benchmark yields on the U.S. side," he said. "That has a pull effect to the upside on Latin America bond prices."

But given the headwinds, prices haven't moved much, he said.

Spreads, meanwhile, widened by about 3 bps, with Venezuela wider by about 20 bps. "That's very reflective of what's going on in the risk environment," he said.

Peru widens on election news

Peru saw spreads widen about 10 to 15 bps on longer-duration credits ahead of Sunday's presidential election runoff. "There's a new poll out today that shows the candidates are in a dead heat into Sunday's runoff," Alvarez said. "That's a negative, because the market had assumed for two or three weeks that [Congresswoman Keiko Fujimori] would win. So Peru is sort of the individual credit running under its own political dynamics."

In terms of the primary market, Latin American issuers have been conspicuously absent as of late, he said.

"Given the surrounds I would tend to think that anyone looking to issue paper would wait," he said. "If benchmark yields are dropping, that plays very much in favor of sovereign or corporate issuance in the region. So they may want to wait and see how much more benchmark rates tighten."

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