Emerging market debt sees red on U.S. jobs data; Nurbank places $150 million on notes

By Reshmi Basu and Paul A. Harris

New York, Oct. 6 - Emerging market debt tracked U.S. equities lower Friday as mixed U.S. employment data resurrected worries about the health of the U.S economy and the outlook for Federal Reserve policy.

In primary news, one corporate priced a deal while two more issuers plan to hit the road.

Kazakhstan's JSC Nurbank sold a $150 million offering of five-year fixed-rate notes (Ba3/B issuer's rating) at 98.543 to yield 9¾% via HSBC and ING.

Meanwhile Chile's Corporacion Nacional de Cobre de Chile (Codelco) plans to start a roadshow for a $500 million offering of 30-year fixed-rate bonds (Aa3/A) on Wednesday, Oct. 11.

The roadshow is scheduled to run until Oct. 18, making stops in Singapore, London, and the United States.

Deutsche Bank and HSBC are lead managers for the Rule 144A/Regulation S transaction.

And the City of Moscow (Baa2/BBB+/BBB+) plans to sell a euro-denominated offering of loan participation notes.

Pricing will take place after the completion of a two-day European roadshow, which is scheduled to start in London on Tuesday, Oct. 10, and then move to Frankfurt on Wednesday, Oct. 11.

Citigroup, Deutsche Bank, Dresdner Kleinwort and JP Morgan are joint bookrunners for the Regulation S issue of senior notes.

No further details such as size and tenor have been announced.

Risk aversion rises on job data

The growth story in the United States remained a pivotal driver in Friday's action across financial markets, according to market sources. U.S. equities snapped a three-day rally and Treasury yields shot up in response to surprisingly weak non-farm payroll numbers and upward revisions to last month's job numbers.

As a result, emerging market debt posted losses on the back of that unsupportive backdrop.

At first markets cheered the headline news that the number of jobs created was far less than expected. The United States economy created 51,000 jobs for the month of September.

But then upon further review, the report showed that the August payrolls saw an upward revision to 188,000 from an originally reported 128,000, which meant that the economy may not be as weak as some believed.

The report suggested that the weakness in the U.S. housing market is not spilling into the corporate sector, which raised speculation the Federal Reserve will not cut rates as soon as some had hoped, according to market sources.

Those concerns dampened sentiments across U.S. core markets as well as emerging market debt, which saw risk aversion rise, particularly in high beta credits, according to a trader.

"Volumes are light. No one took large positions ahead of a holiday weekend," he said, referring to the Columbus Day holiday on Monday in the United States.

"The numbers were definitely a trigger today [Friday], but it is just one set of numbers."

During the session, Latin America saw its bonds fall across the region.

The benchmark Brazilian bond due 2040 was down 0.45 to 130.70 bid, 130.75 offered. The Argentinean bond discount bond due 2033 gave up 1 point to 97.75 bid, 98 offered. And the Venezuelan bond due 2027 also shed one point to 121.60 bid, 121.75 offered.

Ecuador's rise halts after one day

Meanwhile Ecuador failed to extend its upward move from the previous session in trading Friday. On Thursday, the sovereign bonds rallied on short covering after a long string of declines.

On Friday, the country yet again suffered from a one-two punch on election noise and declining U.S. markets.

In trading, the Ecuadorian bond due 2015 lost 0.25 to 94.50 bid, 95.50 offered.

On Thursday, the 2015 bond had shot up 1.75 to 95.25 bid, 95.75 offered

The Andean country has seen its bonds retreat on election nervousness as polls suggested an increased likelihood that radical leftist Rafael Correa will emerge as the outright winner in the Oct. 15 first round of the presidential elections.

Tighter on the week

Overall in emerging markets, the asset class has seen spreads come in by about eight basis points this past week.

Reduced positions and lower supply have counterbalanced fears about lower commodity prices, according to an analyst.

Until year-end, the asset class is expected to trade in narrow ranges, which favors the carry trade, noted the 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.