Brazil up on apparent misreading of headline; Standard Bank of India hits the road for $300 million deal

By Reshmi Basu

New York, Nov. 24 - Emerging market debt crawled Wednesday in an illiquid market as Brazil continued to climb on the apparent misinterpretation of a news headline.

"Brazil is up a lot today [Wednesday]," said a sellside source.

"I think the Brazilians are trying to talk the currency down and not too successfully, I should add. The Brazilians have said that they would like to see the currency weaker because of support for exports.

"This morning [Wednesday] they came out and said the treasury was going to buy $3 billion of foreign dollars for debt service. Immediately the market's take seemed to be that Brazil was going to pre-pay $3 billion of debt."

With such an illiquid market, its takes little news to move the market, said the source. Brazilian paper jumped on the misreading of the government's intention.

"But pretty soon people seemed to understand that all they were saying was that the treasury was going to go out ahead of time and buy the foreign currency that they need to service debt over the next few months, which is part of the concerted effort to talk the real down.

"But even after that the bonds have stayed up. The Brazil 2040s are up almost a point and a half today. The middle of the curve is up similarly," said the sellside source.

During Wednesday's session, the Brazil C bond added ½ a point to 100¾ bid while bond due 2040 gained 1.45 to 116.80 bid.

Other emerging markets paper was mixed. The Mexico bond due 2008 added 0.10 to 114.30 bid while the bond due 2009 lost 0.05 to 122.65 bid. Turkey's bond due 2030 gained 0.12 to 141.20 bid. The Russia bond due 2030 was up 0.01 to 101¾ bid.

State Bank of India hits road

In primary news, the State Bank of India hits the road for an offering of $300 million five-year senior fixed-rate notes on Friday in Tokyo.

The roadshow will then move to Dubai on Nov. 28 and stop in Switzerland and Frankfurt on Nov. 29 and London on Nov. 30.

Deutsche Bank, Citigroup and HSBC are running the Regulation S transaction.

After the holiday break, investors may find a fatter pipeline as issuers look to tap the market over the succeeding two weeks.

"I think people are still thinking that Brazil will do something at some point. Venezuela has gotten approval to do something, but it could be a domestic - as opposed to an external deal," said the source.

"People think that the technicals are going to remain pretty favorable."

After those two weeks, it will feel like the market has closed, added the sellside source.

Ukraine's presidential turmoil

In Ukraine, opposition leader Viktor Yushchenko rejected the official election results, which declared prime minister Viktor Yanukovych as president.

Outgoing president Leonid Kuchma asked that world leaders stay out of the fray, as Yushchenko warned of civil war.

"It's been all over the map today. CDSs have moved around about 100 basis points," said the sellside source.

"The last thing I saw from the traders is that it looks as though it's getting tighter, and people are looking at it as a buying opportunity."

But few are willing to make adjustments to their holdings as the political noise over the disputed elections has the potential to become louder over the long holiday weekend in the United States.

"With something like that, if you're going into a four- or 41/2-day weekend, you may not want to take the risk of the weekend.

"By Monday you may have lost any potential upside. But you also don't have a chance to get out if it starts to unravel in the meantime.

"There may be fewer people willing to play the trade than would be the case if it was happening in the middle of a normal week," said the sellside source.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.