Liquidity thin, flows low ahead of Thanksgiving; ChemChina on roadshow; Zenith in focus

By Christine Van Dusen

Atlanta, Nov. 21 – Emerging markets investors on Monday looked ahead to the Thanksgiving holiday in the United States and continued to assess the likely effects of a Donald Trump presidency amid thin liquidity and softer trading for bonds from names like Turkey.

“With the United States rate and general market backdrop it really feels like the window for primary supply should now be firmly shut,” a London-based trader said. “I spent some time the tail-end of last week talking with clients and the message was clear: ‘It’s been a good year. I don’t want to blow it.’ Same can be said for most of the Street as well.”

The next month should be a “slow grind on low flows and thin liquidity as the correction throws up some value,” he said. “I think most of the fast money in ETF’s has been flushed already, so unless we have major headlines, outflows should tail off as well. Problem is we are at a time when headline risk is high. Throw in the thin liquidity and the sidelined buyers and suddenly I’m thinking, ‘It’s been a good year, I don’t want to blow it’ as well.”

Turkey’s bonds on Monday opened fairly soft, with the dollar sovereign curve lagging most peers, another trader said.

In deal-related news, China National Chemical Corp. (ChemChina) was on a roadshow for a euro-denominated issue of notes, a market source said.

The notes will be issued via wholly owned subsidiary CNRC Capital Ltd., and the proceeds will be used to refinance existing debt at CNRC and for general corporate purposes, according to a report from S&P.

Zenith Bank downgraded

Looking to Africa, Zenith Bank received some attention on Monday after Fitch Ratings revised and downgraded Nigerian banks “following a reassessment of potential sovereign support for the banking sector,” according to a report from Schildershoven Finance BV.

Fitch expressed concern that Nigerian authorities are willing to support the banks but the ability to do so in foreign currency is weakening “due to Nigeria’s eroding foreign currency reserves and revenues, as well as limited confidence that any available foreign currency will not be used to execute other policy objectives.”

Still, Zenith Bank “remains one of the best in Nigeria,” the Schildershoven report said. “However, we do not see any price upside potential in its bond due to the global risk-off market mood and relatively tight spread of the bank’s bond to Treasuries.”

Saudi Arabia trades

In trading on Monday, the recent megadeal from Saudi Arabia – a $17.5 billion issue of notes in three tranches due 2021, 2026 and 2046 – saw some activity, a trader said.

The $5.5 billion 2 3/8% notes due in 2021 that priced at 99.007 to yield 2.588%, or Treasuries plus 135 basis points, traded at 97.75 bid, 97.88 offered after last week’s 98 bid, 98.37 offered.

The $5.5 billion 3¼% notes due in 2026 that priced at 98.679 to yield 3.407%, or Treasuries plus 165 bps, traded Monday at 95.12 bid, 95.38 offered after last week’s 94¾ bid, 95 offered.

And the $6.5 billion 4½% notes due in 2046 that priced at 98.015 to yield 4.623%, or Treasuries plus 210 bps, were quoted at 95 bid, 95¾ offered on Monday after trading at 95.12 bid, 95.63 last week.

Citigroup, HSBC, JPMorgan, Bank of China, BNP Paribas, Deutsche Bank, Goldman Sachs, MUFG Securities, Morgan Stanley and NCB Capital were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for general domestic budgetary purposes.

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