Primary market hosts Ivory Coast deal; Russia reacts to downgrade; rumor swirls around Isbank

By Christine Van Dusen

Atlanta, Feb. 24 – Ivory Coast priced a new issue of notes on Tuesday as investors focused on the ratings downgrade in Russia, rumors about Turkey’s Turkiye Is Bankasi AS (Isbank) and remarks from the Federal Reserve.

Federal Reserve Chairwoman Janet Yellen spoke of an improving economy, leading market-watchers to speculate that the central bank won’t raise rates soon. Yields on U.S. Treasuries fell in response.

Also on Tuesday, bonds from Asia were fairly active, with high-grade names closing unchanged to 3 basis points tighter, a trader said.

“The tone feels firm, with real-money adding duration ahead of Yellen’s testimony tonight,” he said. “The China tech space closed 2 bps to 5 bps tighter.”

China-based Lenovo Group Ltd.’s 2019s traded up, as did Tencent Holdings Ltd.’s 2020s, he said.

“Lower crude overnight had zero impact to the China oil complex, with the sector closing 3 bps to 5 bps tighter,” he said. “Korea closed unchanged.”

Looking to Turkey, credit default swaps spreads opened 1 bp tighter on Tuesday. But the big intrigue so far this week has focused on Isbank, which saw its bonds widen by as much as 15 bps after a Twitter user named Fuat Avni said the lender was going to be seized by authorities.

“Usually, of course, such an arguably implausible statement would be instantly dismissed, but Fuat Avni has a history of correctly predicting political events in Turkey ... suggesting he works close to the authorities,” the trader said. “Isbank has denied the story.”

In deal-related news, Kazakhstan’s JSC Eurasian Bank is looking to issue five-year notes, a market source said. And market sources were whispering about a possible issue of notes from India-focused Indus Gas Ltd.

India tightens

In other trading on Tuesday, notes from India and its corporates were tighter by 2 bps to 7 bps, a trader said.

“Good two-way in short-dated bank paper,” he said.

Among high-yield Asian bonds, property companies from China closed mostly unchanged while many sovereigns ticked higher, he said.

“Indonesia’s long end was ¼ point to ½ point higher,” he said. “The belly of the curve continued to outperform, up ½ point.”

Meanwhile, bonds from Central and emerging Europe were mostly unchanged, a trader said.

Russia in focus

Looking to Russia, the market is expected to remain under pressure following the Monday downgrade of the sovereign’s rating to junk by another ratings agency, according to a report from Schildershoven Finance BV.

“Ongoing capital outflow and rising risks that the military conflict in Ukraine may trigger a decision by the Russian authorities that directly or indirectly undermines the timely servicing of its external debt,” the report said. “We share the opinion of many Russian economists and officials that the timing of the decision is quite strange, given some improvement in the Ukraine, oil prices that are higher than in January and the stabilization of the local [foreign exchange] market.”

The downgrade could inspire some hedge funds to exclude Russian bonds from their portfolios and indexes, the report said.

“Last week we saw that international investors were the main sellers in Russian names and the same may be true this week,” the report said. “We think that the sale in the Russian eurobond market will continue in the coming days.”

Russian spreads narrow a touch

After the downgrade triggered some selling of Russian corporate bonds on Monday and sent spreads as much as 45 bps wider, spreads recovered some ground on Tuesday, a trader said.

And credit default swaps spreads narrowed too, moving in about 8 bps during the morning session, he said.

Cencosud slows down

From Latin America, the new issue of 2025 and 2045 notes from Chile’s Cencosud SA saw activity slow down in the secondary market on Tuesday morning, a New York-based trader said.

The 5.15% notes due in 2025 that priced at 99.637 to yield Treasuries plus 337.5 bps saw some small buying, he said, and the curve inched higher – not quite keeping pace with Treasuries – throughout the session.

The deal also included 6 5/8% notes due in 2045 that priced at 99.909 via HSBC and Scotiabank in a Rule 144A and Regulation S deal.

Most Lat-Am names strong

In other trading from Latin America, most names were strong in the afternoon, another New York-based trader said, with Brazil-based Vale SA and Petroleo Brasileiro SA tightening after days of widening.

Names from Chile and Mexico led the way for high-grade names while banks from Colombia saw only small gains and even widened a touch, he said.

Middle East mixed

Looking to the Middle East, the secondary was busy and saw “decent” volumes, a London-based trader said, with mixed performance among perpetuals.

First Gulf Bank PJSC’s new notes traded between 99.67 and 99.77 on Tuesday after pricing at 99.549.

And Kuwait Projects Co.’s 2019s “felt a little soggy in the market, with defensive bids around,” he said.

Lebanon sees activity

The new notes from Lebanon were active among local buyers and international sellers, a trader said.

On Monday the sovereign priced a two-tranche issue of $2 billion notes due in 10 and 15 years, with $800 million 6.2% notes due 2025 notes and $1.4 billion 6.65% notes due 2030 pricing at par.

“The 10-year and the 15-year closed up 25 cents and 75 cents, respectively, with obvious local buyers and international sellers.”

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

Ivory Coast prints notes

Ivory Coast sold $1 billion amortizing notes due in 2027 at a 6 5/8% yield, a market source said.

The notes were talked at a yield in the 6 7/8% area.

BNP Paribas, Citigroup and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S notes, which will have three equal redemption payments in 2026, 2027 and 2028.

Other details were not immediately available on Tuesday.

Issuance from Uruguay

Also on Monday, Uruguay sold $1.2 billion additional 5.1% bonds due June 18, 2050 at 101.394 to yield 5.014%, or Treasuries plus 235 bps, a market source said.

The notes priced in line with talk, set in the 235 bps area.

BofA Merrill Lynch, Morgan Stanley and Santander were 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 prices bonds

Korea Export-Import Bank (Kexim) sold $200 million floating-rate notes due Aug. 26, 2016 at par to yield Libor plus 25 bps, according to a company filing.

Credit Suisse was 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.

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