EM rebounds after ‘mauling’; Ukraine bonds improve; Codelco tightens; roadshow for Georgia

By Christine Van Dusen

Atlanta, Feb. 12 – Emerging markets bonds – which on Friday morning failed to see much of a rebound amid some relief in European equity markets and oil prices – finished the week on better footing.

“The rally in crude and equities helped to bolster EM bonds, which had spreads tightening and cash prices moving higher,” a trader said.

The morning’s activity was “promising,’ a strategist said, “despite a weak performance of Asian markets.”

Many emerging markets names opened about 10 basis points tighter on Friday after the market “tanked” on Thursday, a trader said.

“Turkey banks got pushed down by the Street, but very limited paper came out and we are already bidding though yesterday’s offer levels in the screens,” he said. “With Turkey corporates we saw locals and a few others checking for paper on the sell-off. They remain in demand.”

Notes from Pakistan remained “very active,” he said. “Real-money investors remain better sellers, but locals are taking paper out at these levels. And if risk sentiment improves, we could be bottoming out here.”

Bonds from Ukraine rebounded on Friday, with trading moving higher on low volumes and “aggressive Street action,” said Fyodor Bagnenko, a fixed-income trader with Dragon Capital. “Quasi-sovereigns moved higher with some decent two-way flow. Corporates remained quiet.”

Looking to Latin America, Chile’s Corporacion Nacional del Cobre de Chile (Codelco) tightened 7 bps amid light volumes while Brazil-based Petroleo Brasileiro SA and Vale SA firmed up a little bit, a New York-based trader said.

Brazil-based Braskem SA was better-offered and high-grade names from Chile continued to trade with “pretty strong credit specificity,” he said. “Overall, the market is very quiet heading into long weekend.”

Lat-Am begins to stabilize

Later in the session, Latin American bonds found “a bit of stability after yesterday’s mauling, but it certainly wasn’t very convincing,” a trader said.

Performance was mixed, and inquiry and volumes were concentrated on just a handful of names, he said.

“Even [Cemex SAB de CV] flow was very light, and it wasn’t easy to pick up paper,” he said. “Our universe will need to see much more stability globally, like today, to see real buyers surface again. And even if that were to take place, it will do so with the usual strong degree of volatility.”

CDS narrow

Five-year credit default swaps spreads from Brazil finished the week at 498 bps from 514 bps, and Mexico’s moved to 224 bps from 233 bps.

“Cash prices take U.S. Treasury weakness in stride, as levels are firmer than yesterday, with the belly of most curves outperforming the long end,” a trader said.

Argentina moved higher while Venezuela and PDVSA dipped, despite the surge in oil, with Venezuela’s 2027s trading at 32.50 from 33.50 and PDVSA’s 2017s ending up in the 38 area after trading at 39.50.

“Flows light on the day as we enter the long weekend, with better buying of low-beta Lat-Am paper, from inquiries we saw,” he said. “Going into this weekend, we still have plenty of headline risk, with China returning on Monday. Hopes are that markets can build on today’s momentum.”

Georgia sets roadshow

In deal-related news, Georgia is planning to hold a roadshow during the first half of this year for a possible issue of notes.

And Oman Telecommunications Co. SAOG is canceling plans for an issue of Islamic bonds, a market source said.

The company held a roadshow in January with Standard Chartered Bank as the structuring adviser and HSBC, National Bank of Oman and Standard Chartered Bank as the joint placement agents for the Regulation S deal.

Other details were not immediately available on Friday.

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