Emerging markets strengthen; Qatar Telecom prices $1.5 billion bonds; primary picks up pace

By Aaron Hochman-Zimmerman

New York, June 2 - Emerging markets spent a calm but positive day rising slightly as word of new deals circulated around syndicate desks.

Qatar Telecom priced $1.5 billion of bonds, making the most noise in the primary, but deals from banks and quasi-sovereigns lined up behind to price in the coming days and weeks.

In trading, "there was "some buying here and there," a buysider said, but low volumes dominated along with a positive tone.

Argentina led the way in Latin America by adding 3½ points to its discount bonds due 2033.

Volatility dropped sharply early but then climbed back to end lower by just 0.41 at 29.63, according to the VIX index. The index is a commonly used measure of market volatility.

As a sector, emerging markets widened out 7 basis points to a spread of 432 bps, according to JPMorgan's EMBI+ index. The EMBI+ calculates the amount of extra yield investors will demand to hold assets in emerging market debt.

Qatar Telecom prices $1.5 billion

Qatar Telecom priced $1.5 billion over two tranches (A1/A-/A+).

The $900 million five-year bonds priced at 99.266 with a coupon of 6½% to yield 6 5/8%, or Treasuries plus 415 bps. The bonds came tight to the talk in the Treasuries plus 425 bps area.

The $600 million 10-year bonds priced at 98.894 with a coupon of 7 7/8% to yield 8.038%, or Treasuries plus 435 bps. The bonds priced tight to the talk in the Treasuries plus 445 bps area.

Barclays Capital, BNP Paribas Securities Corp., Development Bank of Singapore, JPMorgan and RBS Securities Inc. acted as bookrunners for the deal.

Qatar Telecom is a Doha, Qatar-based telecommunications firm.

Before pricing, the bonds were seen higher by 1½ to 2½ points in gray market trading, a trader said.

Banks come alive

Primary action picked up sharply as the market neared the cusp of the summer season.

Russian Agricultural Bank announced that it will offer a dollar-denominated benchmark-sized five-year bond (//BBB).

Barclays and Citigroup will act as bookrunners for the offering.

Russian Agricultural Bank is a Moscow-based lender.

Brazil's Banco Cruzeiro do Sul announced that it will sell a two-year fixed-rate bond at a likely yield of 9¾% (Ba2).

BCP Securities will act as lead manager for the bonds.

The bonds will come from the bank's $1 billion note program.

Proceeds will be used for general corporate purposes.

Branco Cruzeiro do Sul is a Sao Paulo-based lender.

The quasi-sovereign Central Bank of Bahrain plans to offer a dollar-denominated benchmark-sized sukuk.

Calyon, Deutsche Bank and HSBC will act as bookrunners for the offering.

A roadshow will be held in Kuala Lumpur, Singapore, Riyadh and London through June 8.

The Central Bank of Bahrain is a Manama, Bahrain-based public financial institution.

Another quasi-sovereign was announced by Korea Hydro & Nuclear Power Co. Ltd., which has mandated Barclays, Citigroup, Deutsche Bank and Goldman Sachs to manage a roadshow from this week into next week (A2//A+).

Korea Hydro & Nuclear Power is a Seoul-based government run energy firm.

Emerging Europe still better

Emerging Europe saw another positive but slow day in trading on Tuesday.

Issues were "better bid," with "prices clearly stable," but "not a lot of trading" was going on, a trader said.

In Russia, the national oil firm OAO Gazprom expressed its worry that insufficiently supplied reserve tanks in Ukraine will prevent the firm from fulfilling its European contracts, the Itar-Tass News Agency reported.

Kiev has tried to cut the amounts of gas it imports as a means of reducing its debt to Russia; however, "if Ukraine's underground storage facilities are not sufficiently filled during summer, it will be extremely hard for our Ukrainian colleagues to perform their gas transportation obligations," said spokesman Sergei Kupriyanov in the report.

The Russian government bonds due 2030 were seen at 100½ bid, 100¾ offered, while the Ukrainian bonds due 2016 were unchanged at 68 bid, 69 offered.

In Turkey, the inflation rate fell to 5% from 6.1% from April to May, reports said, which may inspire another rate cut from the central bank.

The central bank currently holds its overnight borrowing rate at 9¼% and its overnight lending rate at 11¼%.

The lira was seen trading at 1.525 to the dollar.

The Turkish sovereigns due 2030 were quoted at 150½ bid, 151½ offered.

Argentine leads LatAm

Latin America was generally positive but saw some mixed results.

Argentina's bonds performed well as president Cristina Kirchner announced that "2008 was the year with the most exports in history," at a rally in Comodoro Rivadavia, according to the Buenos Aires Herald.

She touted her own government's record of economic success compared to past administrations, which looked internally for revenue while she focused on external markets.

"Maintaining the economic activity and job stability has been our principal objective. Maybe there were salary reductions or suspensions, but not layoffs, because that causes outrage," she said.

The 8.28% Argentine discount bonds due 2033 jumped 3½ points to 46½ bid.

Meanwhile Venezuela's 9¼% Venezuelan sovereigns due 2027 scaled back gains by 1.2 points to 65.8 bid.

Also in Brazil the 7 1/8% Brazilian government bonds due 2019 slipped 0.85 point to 130 bid.

Asia makes modest gains

Asia posted a positive day as equities inched up and Treasury yields backed off.

In Indonesia, inflation increased by 6.04% in May year over year but only a 0.04% increase since April, the Central Statistics Agency said, according to the Jakarta Post.

The inflation rate from the beginning of the year through the end of May only rose by 0.1%, compared to 5.47% during the same period in 2008.

Inflation may fall as low as 5% for the year, said Rusman Heriawan, head of the statistics agency.

The central bank monetary board will meet on Wednesday, and "there is a room" for a rate cut, said governor Miranda Goeltom, in the report.

The rupiah was seen trading at 10,190 to the dollar.

The Indonesian government bonds due 2019 tacked on 2 points to 128 bid.

Also in the Philippines sovereign bonds due 2030 were quoted at 127 bid.

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