Russia's Sberbank, Brazil's Odebrecht print bonds; EM spreads widen; Middle East active

By Christine Van Dusen

Atlanta, June 21 - Russia's Sberbank and Brazil's Odebrecht Finance Ltd. priced notes on a Thursday that saw spreads tighten, then widen for most emerging markets assets as U.S. stocks plummeted on concern about the global economic crisis.

"It's been a moderately active day and spreads have held in OK-ish, I would say," a London-based trader commented. "This morning the beat went on nicely, with buyers of nine- to 12-year dollar paper which, on a spread basis, is probably still appealing versus some global peers."

Though the market's mood was brightened by the continuation of the Federal Reserve's bond-buying program known as Operation Twist, the glow quickly wore off.

Investors are "seemingly responding more to the downbeat message about the health of the economy than to the anticipated effect of the accommodation itself," according to a report from Barclays Capital Markets. "The [Federal Open Market Committee] also noted that it may take further action if labor market conditions do not improve and lowered its expected path of the Fed funds rate."

The Markit iTraxx SovX index spread was seen Thursday at Treasuries plus 305 basis points, up about 15 bps from its recent lows.

"Our markets have followed equities and spreads, winding up wider on the day after initial tightening this morning," a New York-based trader said. "The run-up seen on Tuesday and part of yesterday now seems far in the past as bids and liquidity overall dried up rather quickly."

Said the London trader, "Broader market-wise, it's a collective time for pause. We've had a decent run since basically last Thursday at lunchtime. So I expect to see some spread consolidation tomorrow."

Sberbank sells notes

In its new deal, lender Sberbank priced a $1 billion issue of notes due June 28, 2019 to yield 5.18%, according to a source close to the deal.

No other pricing information was immediately available on Thursday.

Price talk was revised to 5.2% from a range of 5¼% to 5.3%.

Bank of America Merrill Lynch, JPMorgan, Mitsubishi UFJ and Troika were the bookrunners for the Regulation S transaction.

Prior to pricing, the company's existing 6.48% 2013 notes were trading at 103.68 bid, 104.43 offered, while its 6 1/8% 2022 bonds were seen at 104.50 bid, 105 offered.

Market-watchers were also whispering about a possible $1 billion issue of bonds from Sri Lanka and an offering in 2013 from Belarus.

Odebrecht does deal

In another new deal, Odebrecht Finance, a unit of business conglomerate Construtora Norberto Odebrecht SA, priced a two-tranche $1 billion issue of notes due 2022 and 2042 via Credit Suisse, Itau, JPMorgan and Santander.

The Rule 144A and Regulation S deal included $600 million 5 1/8% notes due June 26, 2022 that priced at 99.421 to yield 5.2%. The notes were whispered at a yield in the 5.4% area.

The second tranche, consisting of $400 million 7 1/8% notes due June 26, 2042, priced at 98.479 to yield 7¼%.

Credit Suisse, Itau, JPMorgan and Santander were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes and for equity investments.

IPIC, Qatar stand out

Long-dated bonds remained popular on Thursday, the London trader said. International Petroleum Investment Co.'s 2041 bonds were trading with a 115 handle while Qatar's 2042 bonds were seen with a 118 handle.

"What a staggering performance by those bonds," he said. "Granted, the Fed has massively boosted the bid for the long end with the Twist program, but with commodities doing what they are doing and the world in the place it's in right now, I don't think I am alone in being totally under-prepared for this move and grab-attack at the long end."

From the corporate side, Qatar-based natural gas producer RasGas Co. Ltd.'s 2016 notes were trading at 107 bid, 107.50 offered.

"And Lebanon five-year paper is coming back to life," he said.

The sovereign's 2017 notes were trading Thursday at 99.25 bid, par offered.

TAQA bonds tighten

Abu Dhabi National Energy Co. (TAQA) was trading well on Thursday, the London trader said.

"We saw some very good interest across the 2017s, 2018s and 2021s yesterday," he said. "Over the month the 2017s have really performed, tightening 25 bps. Arguably there is still some spread value at the long end, but once again these dollar prices are getting tough for the retail investors."

In about six months the company's 2012 notes will come due.

"The front is super well bid," he said. "Very solid."

He said bonds from Dolphin Energy, Qatar National Bank and Emaar Properties were also active.

Dubai in focus

Looking to Dubai, corporate issuer DP World's 2017 notes were trading better than the sovereign's 2017 notes, the London trader said.

"Yet in five-year credit default swaps, DP World trades 90 to 100 through the Dubai government," he said. "Always one of the great peculiarities in this world, if you ask me."

Also, from Dubai, Jebel Ali Free Zone (Jafza) was in the news on Thursday as the company settled its 7.5 billion dirham sukuk bonds, a market source said.

On June 12 Jafza priced a $650 million issue of 7% notes due 2019 at par to yield Treasuries plus 588.9 bps.

Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Citigroup, Dubai Islamic Bank, Emirates NBD, National Bank of Abu Dhabi and Standard Chartered were the bookrunners for the Regulation S deal.

Egypt, Senegal, Gabon active

From Africa, bonds from Egypt were heavy while Senegal's traded at 110.625.

"Buyers are sniffing around on Afrexim, and Morocco is seeing two-way interest," a trader said.

He was also keeping an eye on Gabon, currently in a dispute with South African company Nedbank, which used a court order to freeze bond payment funds. The court order is expected to be lifted soon.

"Bonds are trading down in the Street, closing at 117.12 bid, 117.87 offered," he said.

OGX climbs, falls

In trading from Latin America, Brazil-based OGX Petroleo e Gas Participacoes SA's paper started the day with "a nice move up," the New York trader said.

"Customer flow has been all one way: buying," he said during the morning.

But by the market's close, the bids on OGX's bonds pulled back pretty strongly.

Credits like Vale SA and Petroleo Brasileiro SA (Petrobras), which tightened considerably on Tuesday, tightened a few bps more early on Thursday, he said.

"The Latin American corporate markets weakened but generally escaped the wrath that was being felt in the U.S. equities market and subsequent flight to quality," he said. "But it was only a matter of time."

Mexican homebuilders rebound

Meanwhile, Mexico-based homebuilding companies, which had become very illiquid and had been hit fairly hard, made a comeback on Thursday.

"They're starting to see more daily volume, although it's been very gradual," he said.

Mexican homebuilder Urbi Desarrollos Urbanos SAB de CV's 2022s were up at 104 bid after trading as low as 97¾ last month.

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