Credit downgrade, headline news pound Turkey; Commercial Bank of Qatar mandates banks

By Paul A. Harris

Portland, Ore., May 9 – Emerging markets debt softened on the heels of Tuesday’s announcement by U.S. President Donald Trump, that the United States would abandon an agreement between Iran and the P5+1 countries which created economic incentives for Iran to curb its nuclear weapons program, a London-based trader said.

Higher beta credits were demonstrating the most sensitivity to the development, the source added.

That headline news piled atop already existing difficulties Turkey has been experiencing, the trader said.

On May 1 S&P cited “increasing macroeconomic imbalances,” as it lowered its unsolicited foreign currency long- and short-term sovereign credit ratings on Turkey to BB-/B from BB/B.

The downgrade came a fortnight after emerging markets investors took down Turkey’s 6 1/8% notes due October 2028 in a $2 billion issue.

The S&P downgrades, in conjunction with a Turkish lira that is trading at record lows, and now the regional geopolitical uncertainty in the wake of the withdrawal of a major signatory to the Iran nuclear agreement, have exerted erosional forces upon the price of the new Turkey 6 1/8% notes due 2028, the trader said.

That paper was trading with a 94 handle, down two points on the week, on Wednesday, the source said.

The deal, which priced at 99.427 on April 16, was trading above 99 during the April to May crossover week, the source added, noting that Turkish President Erdogan called an emergency cabinet meeting on Wednesday.

Financial metrics have moved against some of the poorer quality emerging markets credits, the trader said, citing rising interest rates highlighted by a 10-year Treasury note yielding above 3% and a strengthening U.S. dollar as factors moving against that portion of the market.

However, some of Wednesday’s headline news should ultimately register a positive impact on emerging markets, the source added, noting that oil prices rallied in the wake of Trump’s Iran nuclear agreement announcement.

Crude oil prices were rallying hard, early Wednesday afternoon.

The barrel price of West Texas Intermediate crude for June 2018 deliver was up 3.29, or $2.27, on the day, trading at $71.33.

Qatar bank mandates banks

In new issue news, Commercial Bank of Qatar mandated Barclays, Standard Chartered Bank, BofA Merrill Lynch, Wells Fargo, QNB Capital and Al Khaliji to arrange a series of investor meetings ahead of a possible Regulation S debt offering, according to a bond trader based in London.

A benchmark offering of five-year notes could follow, the source said.

© 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.