Issuance from Bank of Sharjah; Petrobras brings 100-year deal; volatile but quiet for EM

By Christine Van Dusen

Atlanta, June 1 – Bank of Sharjah PJSC sold notes and Petroleo Brasileiro SA (Petrobras) moved ahead on a 100-year issue on a quieter Monday for emerging markets assets – particularly those from Asia – as Singapore was out on a holiday.

“Both China May manufacturing and non-manufacturing [data] came in line with expectations, and China equities bounced higher,” a London-based trader said. “Credit, on the other hand, still feels soft, with high-grade cash unchanged to a touch wider.”

Though flows were light, some Chinese corporates saw two-way activity, including China Petroleum & Chemical Corp.’s (Sinopec Group) 2020 notes.

“Malaysia and Korea closed unchanged,” he said. “India marked a couple of basis points wider.”

Said another trader: “Position-cutting into month-end on Friday looks to have done the trick, as flows today have been very benign.”

Investors showed some interest in long-end bonds from Indonesia, but inquiries weren’t aggressive, he said.

The 2044s were down ½ point while the rest of the curve was mostly unchanged.

“Philippines cash is holding in, flat in the front end,” he said. “Off-the-run belly is up ¼ point while the 2040s are up 1/8 point. Again, volumes are minimal.”

In deal-related news, market sources were whispering about a possible issue from Jordan in June or July and up to $400 million of notes from African Export-Import Bank.

OOG fights ban, eyes expansion

Brazil-based Odebrecht Oleo e Gas SA (OOG) was in the news on Monday after the oil company announced plans to expand outside its national market, where it is fighting a ban imposed by main client Petrobras, according to a report from Schildershoven Finance BV.

“OOG is bidding for business in Angola and Mexico as a way to achieve geographic and client diversification,” the report said.

The company is asking Brazilian officials to speed up their investigation and lift the Petrobras ban, Schildershoven said.

“Increasing diversification and a high level of management confidence are positive factors for the company’s bonds,” the report said. “Investors may expect some moderate positive reaction as a result of this announcement.”

Petrobras launches bonds

Meanwhile, Petrobras launched a $2.5 billion issue of 100-year notes at 8.45%, a market source said.

Deutsche Bank and JPMorgan are the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general corporate purposes.

“It’s all about the new 100-year right now,” a New York-based trader said. “The fact that I’m seeing a risk-off in other Brazilian and Mexican high-grade tells me the market thinks maybe this opens the door for other Brazilian high-grade dollar issues, which have been ‘shut down’ for a while now.”

It’s also possible that the risk-off mood stems from an expectation that the market will see higher rates in the near future, he said.

Lat-Am in focus

In other trading of Latin American bonds, low-beta spreads moved wider on Monday afternoon during a “volatile” session, another New York-based trader said.

Venezuela and PDVSA moved a bit lower after economic data was released but managed to stabilize by the close, he said.

Argentina’s bonds ticked slightly higher amid good flows and some better selling overall, he said.

Bank of Sharjah prints bonds

In its new deal, the United Arab Emirates’ Bank of Sharjah priced $500 million 3.374% notes due June 8, 2020 at par to yield 3.374%, or mid-swaps plus 180 bps, a market source said.

JPMorgan, National Bank of Abu Dhabi, Commerzbank, Emirates NBD Capital and First Gulf Bank were the bookrunners for the Regulation S deal.

Globo launches notes

Brazil’s Globo Comunicacao e Participacoes SA, through Pontis III Ltd., launched an issue of $325 million notes due in 10 years at Treasuries plus 265 bps, a market source said.

The notes were talked at a spread in the Treasuries plus high-200-bps area.

BofA Merrill Lynch, Itau BBA and Santander are the bookrunners for the Rule 144A and Regulation S deal.

The secured exchange notes will include a par call 90 days before the final maturity and will be exchangeable for Globo’s notes due 2025.

The media company has headquarters in Rio de Janeiro.

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