Kazakhstan's Temir Zholy, Mexico's America Movil price; EM bonds start 'firm,' then fade

By Christine Van Dusen

Atlanta, July 2 - Mexico's America Movil SAB de CV and Kazakhstan Temir Zholy Finance BV sold notes on a Monday that started out on solid footing but saw trading activity fade following weaker economic data from the United States and continued concern about the European economic crisis.

The early boost came courtesy of last week's news that E.U. leaders were willing to use the European Stability Mechanism to recapitalize banks and to stabilize markets for member nations.

"Short-term measures announced at last week's E.U. summit exceeded market expectations and provided broad-based support to risky assets," according to a report from Barclays Capital. "The positive market reaction likely had as much to do with cautious positioning as the significance of the policy announcements themselves."

Said a London-based trader, "The market started off July on the front foot, for the most part."

But the day's negative headlines - about June manufacturing declines in the United States and the possibility that the Netherlands and Finland may reject the European Union's bailout efforts - took their toll on volumes.

"Firm start to the month before fading this afternoon," the trader said. "Below average day, volumes-wise. Today's ISM figures out of the [United States] clearly put a line in the sand on the market, but as the week and month spread illustrate, and with Ramadan and the summer holidays rapidly approaching, it's still a difficult market shorting."

In its new deal, telecommunications company America Movil priced a €1 billion issue of 3% notes due July 12, 2021 at 99.977 to yield 3.003%, or mid-swaps plus 113 basis points, a market source said.

Deutsche Bank and HSBC were the bookrunners for the Securities and Exchange Commission-registered notes, the proceeds of which will be used for general corporate purposes, including the repayment of debt.

Railway operator Temir Zholy priced $800 million 6.95% notes due July 10, 2042 at par to yield 6.95%, or Treasuries plus 427.5 bps, a market source said.

Barclays Capital, HSBC and Kazkommerts Securities were the bookrunners for the Rule 144A and Regulation S deal.

In other deal-related news, Mumbai-based lender State Bank of India is planning a five-year dollar-denominated issue, according to a syndicate source.

Citigroup, Barclays, Bank of America, Deutsche Bank, UBS and J.P. Morgan are the bookrunners.

Qatar plans notes

Qatar is planning an issue of up to $4 million of Islamic bonds, a market source said.

Standard Chartered, Deutsche Bank, HSBC, Barwa Bank and QInvest are the bookrunners for the deal.

"Qatar still remains an exceedingly solid name and always well in demand at the right level," a trader said. "And given the high dollar prices of existing bonds, I'm sure the credit could get away with a chunky issue, especially a sukuk. The window for issuance is getting smaller though. It's probably two to three weeks for the Gulf region."

Middle East gets buyers

At the start of Monday's session, bonds from the Middle East were well bid, a trader said.

"More Street buying of Abu Dhabi Islamic Bank and Qatar National Bank, and generally all are very well sponsored," he said.

Dubai's 2022 notes were quoted at 107.25, another fresh high and up seven points from issuance.

"That's 89 bps better on the month," he said.

Overall, though, liquidity was fairly thin on Monday, particularly among sovereign names.

Bahrain trades up

The Kingdom of Bahrain's recent issue of $1.5 billion 6 1/8% notes due 2022 that priced at 99.867 were seen at 101 bid, 101.125 offered on Monday morning.

"But it's not running away just yet," the trader said. "It still has a good feel."

At the end of the session, the notes were 30 cents off the day's highs.

"There are still plenty of technical bonds out there, however these ones still have a few loose ones washing around," he said.

Majid Al Futtaim sees sellers

Also attracting attention on Monday was the recent $500 million issue of 5¼% notes due 2019 from Dubai's Majid Al Futtaim Holding LLC. After pricing last week at par, the notes opened Monday near 101, unchanged from Friday.

"It's only a $500 million deal, so over time this bond will be nicely placed," a trader said. "The old [Majid Al Futtaim issue] was at 106.25 bid, this morning."

By the end of the day, the bonds had attracted sellers and closed 25 cents off the morning high prints.

Good demand was noted for Sabic Capital's 2015 notes and Saudi Electricity Co. The latter's 2017 notes opened Monday at 101 bid, 101.50 offered after trading Friday at 100.87 bid, 101.37 offered. Saudi Electricity's 2022 bonds started the day at 104.75 bid, 105.50 offered after being quoted Friday at 104.50 bid, 105.25 offered.

IPIC, Jafza solid

In other trading on Monday, Dar al-Arkan's 2015 notes were seen in the morning with a 106 handle, a trader said.

Activity was also noted for International Petroleum Investment Co., Dubai Water and Electricity Authority's 2015 notes and the recent 2019 notes from Jebel Ali Free Zone (Jafza).

The Jafza notes closed Monday at 105.12 bid, 105.62 offered after pricing at par on June 12.

South Africa steady

Looking to South Africa, most bonds were holding steady on Monday, a trader said.

The sovereign's 2014 bonds were seen at 109.75 bid, 109.95 offered while its 2041 bonds were trading at 127.25 bid, 128.25 offered.

On the corporate side, Eskom Holdings had a solid June. Its 2021 notes were trading Monday at 109.37 bid, 110.37 offered.

Aleesia Forni contributed to this article.

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