New deal from Teva Pharmaceuticals; risk aversion grows; Asia mixed, Lat-Am weakens

By Christine Van Dusen

Atlanta, March 24 – Israel’s Teva Pharmaceutical Industries Ltd. was among the emerging markets issuers to print notes on Tuesday as risk aversion increased, Asian credits were mixed and Latin American bonds opened tighter before weakness crept in.

The recent issue of notes from Singapore’s BOC Aviation Pte. Ltd. – 3% notes due 3030 that priced at 99.458 to yield 3.118%, or Treasuries plus 170 basis points – was firm in trading and moved to a tight of 158 bps before spending most of its time at about 160 bps, a trader said.

“Away from that, the China technology space closed unchanged, with real-money profit-taking after [Tencent Holdings Ltd.] was upgraded,” he said.

Also from China, most high-grade property bonds moved tighter after China Overseas Land and Investment received an asset injection from its parent company, he said.

“The [China Overseas Land and Investment] complex was 5 bps tighter,” he said. “Korea closed a touch softer with the lack of domestic support.”

Meanwhile, bonds from India saw some support, as buyers gravitated to Icici Ltd.

“Ten-year corporates remain well-offered, but the lack of supply supported the market,” he said.

Looking to Latin America, bonds opened tighter and higher but grew weaker amid market contagion, a New York-based trader said.

Brazil-based Petroleo Brasileiro SA opened 10 bps narrower but moved back to the previous day’s levels, as did bonds from Brazil-based Vale SA, he said.

Clients were better sellers of investment-grade and high-grade names, he said, as investors got skittish.

From Central and emerging Europe, trading was heavy, with spreads struggling to keep up with rates, a London-based trader said.

“At the margin it felt like there were sellers of paper, but it feels very technical,” he said. “The Street is long and short the same paper. But the Fed hasn’t said anything to change their ‘dovish’ tone from last week’s FOMC, and with the dollar weaker, week to date, I am still surprised that we have not seen a bigger follow-through into spreads tighter.”

Russia outperforms

Russia’s bonds were outperformers on Tuesday, the London trader said.

“Locals continue to buy, and now that’s pushing internationals to cover shorts,” he said.

From Turkey, bonds moved tighter on the week by between 4 bps and 6 bps, he said.

“The increased political fighting is not helping matters,” he said.

So far this month, overall, “emerging markets have held in well, for the most part,” he said. “There are the obvious trouble spots – like Brazil, Ukraine, Russia – but we have seen good stability in Turkey, the Middle East, [Central and emerging Europe] sovereigns. And this is where I expect cash to be parked into, month-end.”

Issuance from Teva

In its new deal, Israel’s Teva Pharmaceutical Industries priced a two-tranche issue of €2 billion notes due in March of 2023 and 2027, according to a company filing.

The €1.3 billion 1¼% notes due in 2023 priced at 99.059. The €700 million 1 7/8% notes due in 2027 priced at 99.501.

Barclays, BNP Paribas, HSBC and Morgan Stanley were the bookrunners for the Regulation S deal.

The proceeds will be used for general corporate purposes.

Other details were not immediately available on Tuesday.

Ras al Khaimah launches notes

The Emirate of Ras al Khaimah’s launched $1 billion notes due in 2025 at mid-swaps plus 110 bps, a market source said.

The notes were talked at a spread in the 115-bps area.

Al Hilal Bank, Citigroup, JPMorgan and National Bank of Abu Dhabi were the bookrunners for the Regulation S deal.

Akbank to print bonds

Turkey’s Akbank TAS launched a $500 million issue of 10-year notes at 5¼%, a market source said.

JPMorgan, Morgan Stanley and National Bank of Abu Dhabi are the bookrunners for the deal.

Akbank is a lender based in Adana, Turkey.

“Should do O.K. in this environment,” a trader said. “Turkish bank paper is also firm.”

Hyundai Capital draws orders

The new issue of notes from Korea’s Hyundai Capital Services – $400 million 2 5/8% notes due 2020 that priced Monday at 99.848 – drew an order book of $2.4 billion from 186 accounts, a market source said.

The notes came to the market at a spread of Treasuries plus 125 bps via ANZ, BofA Merrill Lynch, Citigroup and Deutsche Bank in a Rule 144A and Regulation S deal.

About 43% of the orders came from the United States, 36% from Asia and 21% from Europe. Fund managers picked up 55%, banks 15%, insurers and pension funds 15%, sovereign wealth funds 10% and others 5%.

On Tuesday the notes were trading at 123 bps bid, 120 bps offered.

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