Mexico issues two tranches; backdrop favorable for EM; LatAm names tighten; Bahrain could issue

By Christine Van Dusen

Atlanta, Aug. 8 – Mexico sold new notes on a Monday that saw emerging markets assets trade well on the day but close off their best levels as the previous week’s central bank decisions created a favorable backdrop.

“While the United States 10-year Treasury yield climbed by 10 basis points into this morning following the strong job gains, it will unlikely shift investors’ expectation of a rate hike amid easing policies in other key developed markets and ahead of the U.S. elections,” a London-based analyst said.

Latin American bonds experienced “varying degrees of strength” on Monday, with selling slowing during the morning session, a New York-based trader said.

“Some credits have yet to find much giddy-up, as dealer longs are still putting pressure on them,” he said.

Colombia’s Ecopetrol SA was an outlier, he said, running up by as much as 2 points on muted volumes.

“Peru also seems to be struggling to find its way higher, with only a slight move higher today in the banks and various corporates,” he said. “Mexican high-grade has managed to strengthen, and [Cemex SAB de CV] is also grinding higher with very little selling. Most days we see some amount of Cemex selling from an institutional account base.”

Brazil’s five-year credit default swaps spreads closed Monday at 271 basis points, out from 268 bps after trading as tight as 267 bps, another trader said. Mexico’s outperformed, moving to 139 bps from 142 bps and narrowing earlier in the session to 137 bps.

“It’s important to note that Mexican cash bonds did not feel heavy despite the announcement of a tap and new long-end issue,” he said. “Cash bonds in general opened higher but faded into the close to finish a touch higher to unchanged.”

Venezuela, Argentina tick higher

Venezuela’s 2026s were at 47 from 46.40, PDVSA’s 2017s closed at 73.25 from 73 and Argentina’s Bonar 2024s moved to 116.90 from 116.70, the trader said.

The latter sovereign’s 2026s finished 109.45 from 109.30.

“Overall flows and volumes were largely subdued, with some late-day sellers of low-beta LatAm sovereigns seen,” he said.

Mexico sells bonds

In its new deal, Mexico priced a $2.76 billion two-tranche issue of notes due in 2026 and 2047, a syndicate source said.

The $760 million tap of the 4 1/8% notes due Jan. 21, 2026 priced at 108.831 to yield 3.042%, or Treasuries plus 145 bps. The notes were talked in the 165 bps area.

The original issue priced in January at 99.676 to yield 4.165%, or Treasuries plus 210 bps.

The new $2 billion 4.35% notes due 2047 priced at 99.735 to yield 4.366%, or Treasuries plus 205 bps. The notes were talked in the 225 bps area.

BBVA, BofA Merrill Lynch and Credit Suisse were the bookrunners for the Securities and Exchange Commission-registered deal.

The sovereign will direct the proceeds towards the redemption of part or all of its outstanding 5 5/8% notes due 2017.

ADB gives guidance

Philippines-based Asian Development Bank set talk for a two-tranche issue of dollar-denominated and benchmark-sized notes, a market source said.

The 2019 notes were talked at a spread in the mid-swaps plus 3 basis points area. The 2026 notes were talked in the 33 bps area.

BofA Merrill Lynch, Credit Agricole and JPMorgan are the bookrunners for the deal.

Asian Development Bank is a Mandaluyong, Philippines-based regional development bank.

Bahrain seeks issuance

Bahrain is looking to issue new eurobonds, a market source said.

The sovereign is currently seeking advisers for the transaction.

Other details were not immediately available on Monday.

Bancomext prints notes

On Friday, Mexico’s Banco Nacional de Comercio Exterior, SNC, Institucion de Banca de Desarrollo (Bancomext) priced $700 million 3.8% notes due Aug. 11, 2026 at 98.959, a market source said.

Credit Suisse and BBVA were the bookrunners for the deal.

Other details were not immediately available on Monday.

Bancomext is a state-owned bank based in Mexico City.

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