CEE Bonds

Gazprom has picked banks for a euro transaction and begins a roadshow on Monday. The basis swap from euros into dollars has become steadily less favourable for borrowers, though it is not clear whether Gazprom will swap the proceeds or not. But strategy savvy borrowers still have ample reasons to build out euro curves, said debt bankers.

Sberbank is targeting a 10 year non-call five deal or a 10 year bullet note for its subordinated bond, but would prefer the former, according to a source close to the deal. The note is expected to be priced later this week, with Sberbank’s roadshow finishing on Wednesday.

The Swiss market is set to enjoy a burst of issuance from Antipodean issuers, with ANZ New Zealand due to price a new six year on Wednesday afternoon and Australian retail bank Bendigo and Adelaide Bank arranging investor meetings for next week.

Slovenia offered a sign of just how much pent up demand is present in the CEEMEA bond market, building an orderbook of over $16bn for its dual tranche deal on Monday. The notes were trading 15bp-20bp tighter on Tuesday morning, despite being priced flat to inside the sovereign’s secondary curve. This left debt bankers on the bond in no doubt that the reception and performance was down to a lack of dollar issuance rather than a juicy spread.

The Republic of Slovenia gave the CEEMEA market just what it needed on Monday, following a bare week for bond supply. The borrower opened books on a dual tranche dollar transaction with an attractive starting spread. And in an EM market riven with credit concerns, a successful deal from a solid sovereign will demonstrate that investor appetite for the right name remains untouched by worries in the wider market, said bankers on the deal.

Nostrum Oil and Gas, formerly Zhaikmunai, has released initial price thoughts of 6.5% yield area for its five year non-call three bond. The Kazakhstan based oil and gas company has set a target of $400m for the deal, but the size is not capped.

Total EM volumes are only marginally down on last year to date, at $71.3bn, despite secondary trading levels having been rocked by an emerging markets sell off over the last fortnight. The total volume of new EM paper sold is only $36bn lower than at this point in 2013, according to Dealogic data.

Sukuk’s advantageous pricing for borrowers over conventional bonds in recent years has evaporated in the Gulf – leaving only disadvantageous structuring costs in the Islamic market – but it does not follow that sukuk volumes are going to disappear too. Far from changing tack to bonds, for those who can issue both the rationale to favour sukuk is stronger than ever.

CEEMEA bankers are dusting off their Bloomberg terminals in preparation for a resurgence of new issue business next week. DCM and syndicate officials' most conservative estimate for the number of new CEEMEA issues that will be printed next week was three and the most bullish was seven.

Sberbank is roadshowing a tier two bond in the US and Europe from Monday to Wednesday next week and could become the first bank to try to issue under Russia’s updated Basel III framework for subordinated debt.

Kazakhstan based oil and gas company Nostrum Oil and Gas, formerly known as Zhaikmunai, will start a roadshow on Thursday for a dollar benchmark bond. The investor meetings are the first from a CEEMEA issuer since the sell-off in emerging market assets started on January 24.

Czech energy utility EP Energy attracted more than €1.5bn of orders last Friday for the first bond issued by its holding company, thanks to strong demand from traditional European high yield buyers.