Argentina century bonds up a point in gray market; Nigeria prices; Cyprus, Sibanye Gold on tap

By Rebecca Melvin and Colin Hanner

New York, June 19 – Argentina’s $2.75 billion of 100-year bonds that priced Monday were up a point in the gray market ahead of final terms being fixed and pulled the rest of the country’s bonds lower, market sources said.

Argentina’s existing longer-dated issues were down by ½ point to 1½ points.

The new Argentina notes were being reoffered at 90, and investors swarmed to buy the new deal, which was more than 2.5 times oversubscribed.

How well the deal did was surprising given the long duration of the notes – which do not mature until 2117 – and given that Argentina just came out of restructuring only 14 months ago, a New York-based sellside source said.

“It had flawless execution. The book just flew and it had better execution than is currently seen in Mexico,” the source said.

The new Argentina bonds priced at about 90 basis points wide of its 30-year, long bond, the source said, acknowledging that it was surprising.

“They were able to do this just 90 back of the long bonds,” which is nearly comparable to Mexico, the source said.

Outside of Latin America, Nigeria sold $300 million 5 5/8% five-year diaspora bonds (B1/B/B+) at par on Monday. Price talk for the notes was tightened from 5¾%.

Proceeds of the African deal will be used for budgeted capital expenditures.

In the secondary arena, market players continued to eye the situation in the Middle East, where primary market activity has slowed during the month of Ramadan, but existing notes remain vulnerable to political and military developments in the region, including news that a U.S. fighter jet shot down a Syrian jet over the weekend, MUFG Securities analyst Trieu Pham pointed out in a note.

The United States asserted that the action was taken in self-defense after a military jet allegedly dropped bombs near U.S-based forces. But the Syrian army rejected the claims, saying that its plane was on a mission to fight Islamic State forces.

Meanwhile there were reports that Saudi Arabia border guards opened fire on Iranian fishing boats last Friday, killing one person, and in the dispute between Qatar and the Saudi-led group of Arab countries, Saudi Foreign Minister Adel al-Jubeir said a list of grievances was being drawn up that Qatar has to “fix.” The United States and European Union have increased their involvement in the situation, and U.S. Secretary of State Rex Tillerson cancelled his trip to the Organization of American States meeting in Mexico to continue efforts to de-escalate Middle East tensions.

In addition to Qatar, the market this week will be focused on discussions related to the U.S. Federal Reserve, following its rate hike last week, and on Brexit negotiations, a market source said.

The calendar in emerging markets will look leaner this week than in the past few weeks, though there are still deals in the pipeline, sources said.

Sibanye Gold Ltd. and Cyprus were expected to price deals on Tuesday, and EuroChem Global Investments Ltd. was also seen pricing imminently after launching last week.

“After a few busy weeks, it will be a relief to look forward to this week’s macro schedule,” a market source said, citing the preliminary Purchasing Managers Index and U.S. home sales as examples of the week’s data points.

Dana Gas PJSC is seeking to restructure an allegedly unlawful sukuk that comes due in the fall and will hold an investor call on Wednesday regarding planned restructuring.

Argentina sells100-year bonds

Argentina priced its first 100-year paper, making that nation a member of a select group of “century bond” issuers that includes Mexico, Ireland and China, among others. The new deal was stronger in the gray market ahead of final terms being fixed late Monday. However, the rest of Argentina’s curve was “down a lot” on Monday, a New York-based-trading source said.

Longer-dated issues like its 2046 bonds, which were among the most actively traded, were down ½ point to 1½ point. The Argentina 7 5/8% notes due 2046 were quoted at 105¾ bid, 106 offered at the end of the session.

The Argentina 2027 bonds were also actively traded and were seen around the same level.

“Obviously the new paper” pulled things down, a trader said.

Argentina priced $2.75 billion of the 100-year senior unsecured notes with a 7 1/8% coupon and at a reoffer price of 90 that bumped the yield up to 7.9%. And that was before an additional point of value being added from buyers in the gray market, a market source noted.

The secret of its appeal is “duration and convexity,” a market source said. “There is a bid for duration and convexity,” but whether there is enough demand to make this deal a precedent for others in Latin America credit was impossible to know, he said.

Argentina has issued a significant amount of debt in the last year since it came out of restructuring, including $16 billion in three tranches priced last April, which represented the nation’s first debt in about 15 years. Those tranches were for five-, 10- and 30-years in duration. The long hiatus in accessing the capital markets came after the sovereign defaulted on $80 billion of debt in 2001.

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