COMMENT: CEEMEA sees bond supply deluge

LONDON, Oct 17 (IFR) - "It's never been as good," a CEEMEA bond official said to IFR recently. He's not kidding.

At last count (and it's getting hard to keep up), there are 14 live deals from the region - Anadolu Efes, Bank of Saint Petersburg, Brunswick Rail, Calik Holding, EP Energy, Gazprombank, Home Credit and Finance Bank, Investcorp, Isbank, Plaza Centres, Sberbank, Slovenia, Tupras and Vakifbank. And that's not counting KazMunaiGas, which has just finished a non-deal roadshow.

More mandates will follow, with borrowers such as Morocco, Jordan, Finansbank and Yapi Kredi known to have hired arrangers.

Already this week Akbank, VTB and Gulf Investment Corporation have printed deals. "It is open season in CEEMEA primary," said another banker.

The smorgasbord of borrowers and structures are on display - sovereigns, financials, corporates, debutantes, serial issuers, banks raising capital through Lower Tier 2 and Upper Tier 2, holding companies seeking funds, investment grade, high-yield, deals in dollars, Swiss francs and renminbi.

And with money continuing to pour into EM bond funds, and the ECB's put option against a eurozone collapse in place, the good times are likely to last, added bankers. "We think there will be pretty reasonable market access for the next 12 months," said one syndicate official.

RELATIVE VALUE

Such is the desperation for yield that relative value has gone out of the window. Ten-year, B+ rated Zambia risk is trading inside nine-year Single A rated Slovenia (the African sovereign's 2022 notes are at a yield of 5.32%, while Slovenia's 2021 bonds are at 5.75%).

The Balkan nation has its fair share of problems but is being disproportionately punished simply because it is in the eurozone. Meanwhile, Zambia's levels are so incredibly tight largely because of the scarce amount of African bonds in the market.

New issue premia, too, has shrunk with 10bp the most that investors can expect, though the chances are that many borrowers' curves will get repriced, as Severstal's was earlier this month following its USD750m 5.90% due 2022s in a deal that was more than seven-times subscribed.

With spreads and yields grinding tighter, one wonders how long investors will continue to dive into new transactions. Usually fund managers start shutting up shop in the run to Christmas. This year, that date might be delayed to as late as possible.

Moreover, at some point economic fundamentals will again become the key driver of market action. Given how dire those fundamentals are - the upcoming US fiscal cliff, a possible hard landing in China, continued depression in the troubled eurozone economies - the spreads and yields of some recent CEEMEA bond deals may actually reflect their ratings.

Finding a seller might be difficult now, finding a buyer then may prove impossible.