Colombia, Telekom Malaysia bring deals; levels soft; investors eye Brazil's Copom meeting

By Reshmi Basu and Paul A. Harris

New York, Sept. 13 - Emerging market debt was softer during Monday's session as Colombia tapped the international bond markets for the first time since January.

"It's been pretty quiet," said a trader. "EM is watching Treasuries."

During Monday's session, U.S. Treasury prices rose on comments made by Federal Reserve Governor Susan Bies. She said there was "no urgency" to lift interest rates until there was evidence of economic growth. The yield on the 10-year U.S. Treasury noted ended at 4.14% after gaining 11/32.

Overall, emerging market paper was softer in a quiet session. The Brazil C bond lost 0.125 points to 97.875 bid while the bond due 2040 fell 0.55 to 107.95 bid. Russia's bond due 2030 was down 0.188 to 95¾ bid. The Mexico bond due 2008 was up 0.15 to 149.15 while the bond due 2026 fell 0.10 to 149.15 bid.

"The big news of the day has been the announcement by Colombia that they were issuing paper," said Enrique Alvarez, Latin American debt strategist at think tank IDEAglobal.

The country priced $500 million global bonds (Ba2/BB) at 98.248 to yield 8½% via Citigroup and Merrill Lynch.

"And Colombia, on that fact, had been a little on the defensive - a little bit of accommodation of positions for the new supply that is going to be out there," said Alvarez.

"Other than that, you haven't had much. You had a wait and see day on what direction the [U.S.] Treasury is going to take."

Also in primary action, Telekom Malaysia Bhd priced a $500 million 10-year bullet (A3/A-) at 99.754 to yield Treasuries plus 112 basis points.

A market source said the deal "went extremely well and was oversubscribed".

"That deal had two things going for it," said the source. "It's investment grade and from Malaysia."

Deutsche Bank Securities, UBS Investment Bank and Commerce International Merchant Bankers were the lead managers for the Regulation S notes.

Telekom Malaysia is a Kuala Lumpur-based provider of voice and data services.

Copom meeting

Looking ahead, investors will be paying close attention to the Central Bank monetary policy committee (Copom) meeting on Tuesday and Wednesday in Brazil.

Market consensus appears to be divided as to how the Central Bank will act. The Selic rate has been untouched since last April and is currently 16%.

"We are looking at possibly a quarter point rise for the Selic rate," said Alvarez.

"There are proponents out there for no change. And there's also a camp out there that says it should rise by ½%.

"At this point, I think the market may not have fully priced a modification to the upside to the Selic rate," he noted.

Until the meeting, "you have to wait and see what direction U.S. Treasuries will be pushing," said Alvarez.

And meantime, while Thursday's consumer price index numbers will be somewhat influential for the United States, it should not be a major determinant, he said.

"The market will wait to see what Mr. Greenspan does on the [Sept.] 21," the next Federal Open Market Committee meeting.

"And then moving forward, non-farm payrolls appear to be the main driver for the U.S. Treasuries at this point," he added.

"What does that all mean for Latin America?

"You have a solid market - lateral drift in the meantime.

"And depending on what the Copom does, you can have variations in one direction or the other," he noted.

Philippines down on Treasurer resignation

Paper from the Philippines fell on news that the national treasurer, Mina Figueroa, had tendered her resignation, effective Oct. 15.

The bond due 2016 dropped 1¼ points to 96 bid during Monday's session.

© 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.