Banacol, Yapi Kredi mull notes on strong day for EM assets; Middle East, Africa outperform

By Christine Van Dusen

Atlanta, Aug. 15 - Emerging markets assets had a fairly solid start to the week - with Colombia-based Banacol Group and Turkey's Yapi ve Kredi Bankasi AS pondering new issues - though flows remained light on Monday, given that the Korean and Indian markets were closed for local holidays.

"There's been a good recovery in spreads as the market started the week off on solid footing, despite the holidays in a lot of the world," a trader said. "We only really saw buyers, right from the word 'go.'"

Said another trader: "It's a rare positive start to the week ... with bonds generally a half-point firmer than Friday's close."

The Markit iTraxx SovX WE index was seen at 245 basis points to 250 bps, which generally reflected the better mood but also the wide bid-offer on a quiet open, he said.

"The market did pause a little for breath from the initial rampant spread tightening we saw in the first two hours of play," a trader said. "However spreads are still closing out well bid. Selling on upticks over the past two to three weeks has proven a fairly successful approach. Let's see how much further we can perform after this decent snap-back in spreads."

The Middle East and North Africa saw a boost in activity, with most benchmark names 5 bps to 10 bps firmer, he said.

"The only assets not to rally at least 20 bps today are those that outperformed in the down-move," he said.

"It remains a technical market," another trader said. "The market is short the same names and long the same names."

Dubai names lifted

Sukuks, in particular, were very firm.

"Dubai's five-year credit default swaps spread that was lifted to 430 bps last week is now 365 [bps] bid, 385 [bps] offered," he said. "Dubai's 2014 notes opened 15 bps tighter, and Dubai Water and Electricity Authority's 2015s are 25 bps tighter."

Meanwhile, the long end of Abu Dhabi National Energy Co. (TAQA) was up at least a point, he said. The company's 2036 notes were "bulletproof" while the 2017s and 2018s were 25 bps and 35 bps tighter over the month, respectively.

"There are simply no bonds going around and a massive squeeze occurring there," he said. "We did see a little sporadic selling of some front-dated Qatar and Abu Dhabi names mid-morning, but overall the market was very happy to absorb the limited supply."

Buyers eye bank paper

Buyers were noted for Sharjah Islamic Bank, which saw its 2016s trading at 103.8125, while Qatar National Bank was tighter by 20 bps at 101.5.

The recent issue of notes from Abu Dhabi's First Gulf Bank - 3.797% notes due 2016 that priced at par on July 26 - opened at 101.12 bid, 101.37 offered.

Also from the Middle East, Emirates' 2016 notes were tighter by 20 bps on the day at 99 bid, 99.5 offered.

And from Africa, Cairo-based African Export-Import Bank's 2016s opened the session at 100.3 bid, 100.8 - about 15 bps tighter - before settling in closer to 100.3 bid, 100.7 offered.

"There's active two-way in Afrexim's 2016s today, closing out 12 to 15 bps better," he said. "Liquidity overall is still patchy as the market recovers from last week's widening and stress."

Ukraine rebounds

In other trading, Ukraine - which was among the hardest hit during the previous week - bounced back on Monday, a trader said.

"Russia's quasi-sovereigns are all very orderly," he said.

And Turkey's sovereign bonds were strong early in the session, with the long end about 10 bps tighter.

"The belly of the curve was lifted on the Street and the '41s are doing decent work around 98.50 levels," he said. "We're seeing mainly retail buying of Isbank's 2016s, and it feels like there are still sellers of Yapi Kredi on the Street. Akbank papers are currently the laggards."

This came as Yapi Kredi, the Istanbul-based lender, received regulatory approval for an issue of up to $1.25 billion of bonds, a market source said.

No other details on the possible deal were immediately available on Monday.

Afternoon quieter

As the day went on, the activity for Turkish names slowed a bit, a trader said.

"We're finishing the day with a quieter afternoon session," he said. "It's good to see liquidity coming back to the belly of the curve. However, sovereigns couldn't hold on to earlier gains of the morning and are closing the day about 5 bps tighter."

Isbank continued to outperform while Yapi Kredi and Garanti Bankasi AS finished the day with some better selling and Akbank continued to lag.

"We're seeing mostly switch trades between Akbank papers in scrap amounts," he said.

In other news on Monday, Colombia-based fruit company Banacol Group is planning a roadshow for a possible issue of $200 million to $300 million of notes, a market source said.

Citigroup is the bookrunner for the deal.

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