RAKbank sells notes; spreads tighten on Greece news; Ukraine still tense; Kexim plans deal

By Christine Van Dusen

Atlanta, Feb. 23 – Dubai-based National Bank of Ras Al Khaimah (RAKbank) sold notes on Monday as sentiment improved and spreads tightened on the move in rates and the recent news of a debt extension for Greece. But investors remained concerned about Ukraine.

“The wait for peace in eastern Ukraine is proving very tense, essentially because Minsk II didn’t agree on either the demarcation lines or an international peacekeeping force,” according to a report from Commerzbank. “Meanwhile, separatist forces in eastern Ukraine agreed to start withdrawing heavy weapons to behind the buffer zone, while there has been an exchange of hundreds of prisoners on both sides.”

And while ceasefire violations continue, the number of violations is declining, the report said.

“Issues such as Moody’s Russia downgrade of external and domestic bonds to Ba1 are unnecessarily blurring the picture at just the wrong time,” the report said. “With the U.S. about to introduce further sanctions, what Ukraine needs is a few days of real cease-fire to allow the Minsk II ‘agreements’ to proceed.”

Against this backdrop, credit default swaps spreads for Russia were 15 basis points wider on Monday morning while sovereign bonds moved out 10 bps to 15 bps, a London-based analyst said.

Also on Monday, bonds from Central and emerging Europe opened tighter, with strong demand sighted for Croatia and Serbia, a London-based trader said.

“I guess the spread cushion versus investment-grade [emerging markets] will help if rates start edging up ahead of Yellen’s testimony at the end of the week,” he said. “We are at the tights in most of Central and emerging Europe, but the macro backdrop is supportive, for now.”

Asian corporates tighten

Trading of corporate bonds from Asia was a bit quiet on Monday as the Chinese New Year holiday continued in some regions, another London-based trader said.

“High-grade spreads closed 2 bps to 5 bps tighter from where we closed last Wednesday,” he said. “Ten-year paper outperformed as clients took advantage of higher yields and chased duration.”

Oil companies from China saw their bonds narrow by 5 bps, even as crude prices declined, he said. And property companies from China were quiet, closing unchanged to ¼ point higher.

Sovereign spreads compress

The curve for Indonesia held in well, he said, closing ¼ point to ¾ point higher, a trader said. The belly of the curve performed best, with the 2025 notes up at 103.

“Spreads continued to compress in India, with five-year senior financials in demand,” he said. “Good two-way in corporates, and spreads are a couple bps tighter.”

High-yield sovereigns fared better, he said, with the Philippines curve unchanged to ¼ point higher.

“Philippines’ 2040 traded up at 105 3/8 and closed at 105 bid, 105¼ as U.S. Treasuries dipped,” he said.

Middle East in focus

Middle Eastern bonds put in a busy morning on Monday, then saw activity taper off later in the session while spreads held in, a trader said.

“Perpetuals were a little more balanced today after a decent squeeze last week,” he said. “Dar al-Arkan Holdings saw two-way on the 2016s and 2018s and Kuwait Energy had retail activity.”

The primary market is expected to pick up, he said.

“Plenty of potential deals soon, as well, including Emirates airlines, Abu Dhabi Commercial Bank,” he said. “In Africa we may have Ivory Coast.”

Issuance from RAKbank

Dubai-based commercial lender RAKbank sold an additional $300 million of its 3¼% notes due in five years at 100.875, a market source said.

National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S deal.

The original $500 million 3¼% five-year notes priced in June at 99.275 to yield mid-swaps plus 160 bps.

Lebanon launches notes

Lebanon launched a two-tranche issue of $2 billion notes due in 10 and 15 years, a market source said.

The $800 million 2025 notes launched at 6.2%, at the tight end of talk.

The $1.4 billion notes due 2030 launched at 6.65%, also at the tight end of talk.

Blom Bank, Citigroup and Societe Generale de Banque au Liban are the bookrunners for the Regulation S deal.

Uruguay talks tap

Uruguay gave price guidance in the Treasuries plus 235-bps area for a benchmark-sized tap of its dollar-denominated 5.1% bonds due June 18, 2050, a market source said.

BofA Merrill Lynch, Morgan Stanley and Santander are the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general budgetary purposes.

The new bonds will be consolidated with the sovereign’s $2 billion outstanding 5.1% notes, issued on June 18, 2014, according to a governmental filing.

Kexim to issue

Korea Export-Import Bank is looking to issue dollar-denominated floating-rate notes, according to a company filing.

Credit Suisse is the bookrunner for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general operations, including extending foreign currency loans and for the repayment of debt.

© 2015 Prospect News.
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