Russia bonds heavy; Egypt deals edge par; focus shifts to Saudi Arabia; Qatar eyes deal

By Rebecca Melvin

New York, April 10 – Russia’s emerging markets bonds were very heavy on Tuesday in continuation of Monday’s pain after the U.S. Treasury sanctioned seven Russian oligarchs, 12 companies that they control and 17 senior government officials at the end of last week.

Five-year credit default swaps for the sovereign were trading at about 151 basis points, which was up close to 15 bps, a London-based trader said on Tuesday. It was the highest in about eight months, having jumped to 138 bps on Monday from 121 bps on Friday.

Meanwhile, the average yield spread of Russian sovereign bonds over U.S. Treasuries on the JPMorgan EMBI Global diversified index also widened by 21 bps to 206 bps.

Russia’s sovereign dollar notes due 2043 were heard down four cents to 105.6, and its June 2027 bond was down 2.5 cents to 94.9. Corporate bonds were also lower, sources said.

But Egypt’s new tranches released for secondary market action on Tuesday were slightly better. The Egypt 2026 notes were quoted 100¼ bid, 100½ offered toward the end of London’s session, and the new Egypt 2030 notes were quoted at 100¼ bid, 100.40 offered.

But the focus was shifting in the Middle East and Africa region to Saudi Arabia, which announced a new triple-tranche offering with pricing set late in the day. The initial price talk for its planned seven-year, 12-year and long bond dollar benchmarks was for a yield spread in the U.S. Treasuries plus 170 bps area for the 2025 notes; at Treasuries plus 200 bps for the 2030 notes; and at Treasuries plus 235 bps for the 2049 notes.

In MENA, “it’s all about [Saudi Arabia] coming back with a three-tranche deal. The book is already over $30 billion I hear for it.”

Meanwhile, Qatar is on the calendar with a triple tranche of dollar five-, 10- and 30-year notes slated to price following the wrap-up of investor meetings on Wednesday subject to market conditions. The Rule 144A and Regulation S notes were being sold via bookrunners Al Khaliji, Barclays, Credit Agricole, Credit Suisse, Deutsche Bank, Mizuho, QNB Bank and Standard Chartered.

The sudden attention shift to Saudi Arabia could put that deal on the back burner.

“They may wait until next week now; who knows,” a London-based trader said.

For Asia, China’s CK Hutchison Holdings Ltd. priced €1.25 billion of notes in two tranches of seven and 12 years (expected ratings: A2/A-/A-).

The €750 million tranche of seven-year notes priced to yield mid-swaps plus 68 bps, which was trimmed from guidance in the area of mid-swaps plus 70 bps and initial price talk in the mid-swaps plus 80 bps area. The deal sized was at the larger end of expectations for a €500 million to €750 million deal.

The €500 million tranche of 12-year notes priced to yield mid-swaps plus 93 bps, which was trimmed from guidance in the area of mid-swaps plus 95 bps and initial price talk in the area of mid-swaps plus 100 bps.

The primary market for the Latin America region was quiet on Tuesday with no new deals announced after the successful pricing of the Panama’s $1.2 billion of investment-grade notes on Monday.

“It’s just the Panama transaction this week so for, I believe,” a New York-based market source said.

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