Risk-off mode persists for most of session; Greek bonds falter; KOKS, Colombia seek issues

By Christine Van Dusen

Atlanta, June 16 – Weakness persisted for many emerging markets bonds on Tuesday as uncertainty about Greece’s debt situation kept investors cautious.

“All eyes are on the Fed tomorrow, with Greece also an ongoing catalyst, triggering market volatility,” a New York-based trader said.

On Tuesday, Greece’s banking bonds took a dive after the government and its creditors failed to agree on a way to move forward with a bailout plan.

“We are wider this morning as the risk-off tone prevails,” a trader said.

Latin American bonds moved 2 basis points to 3 bps wider in the morning, with five-year credit default swaps spreads for Brazil widening to 252 bps from 250 bps, and cash prices drifted lower as U.S. Treasuries fell off their highs.

Chile’s Cencosud SA remained consistent, with two-way activity and some liquidity for the 2023 and 2025 bonds, another trader said. The company’s 2045s were the quietest during the session.

The curve for Colombia’s Ecopetrol SA remained under pressure, as expected, given that its curve tends to suffer during a market downtrade, a trader said.

And Latin America-focused Pacific Rubiales saw its curve slip as supporters of the takeover by Alfa SAB de CV and opponents mailed out dueling proxies, he said.

“I would tend to think a good number of minority shareholders are not really paying attention,” he said. “The ones that are probably have their minds made up.”

In deal-related news, Russia’s KOKS Group is looking to issue $350 million of notes due in 4˝ years via Citigroup, Renaissance Capital and Sberbank.

And Colombia is looking to issue more than $3 billion of international bonds in 2016, a market source said.

Asia in focus

Asian credits were weak on Tuesday, with investment-grade cash bonds starting the day broadly unchanged before leaking wider as the day went on, a London-based trader said.

“Most of the selling flowed through in the morning, pushing spreads 3 bps to 5 bps wider,” he said. “Post-London open, we traded another leg lower and ended the day 4 bps to 6 bps wider.”

Bank paper from Asia was firm, with demand sighted for five-year financials, he said.

“Korea remained resilient, with spreads unchanged to a couple wider,” he said. “India was the biggest mover today, as 10-year corporates gapped 5 bps to 7 bps.”

Petrobras, Vale widen again

In other trading, Brazil-based Petroleo Brasileiro SA (Petrobras) and Vale SA moved out again, even after Monday’s significant widening, a trader said.

Petrobras’ recent century bond – a $2.5 billion issue of 6.85% notes due 2115 that priced at 81.070 to yield 8.45%, or Treasuries plus 549.3 bps – no longer outperformed, he said.

“We should continue to move wider as liquidity worsens into the summer and the risk-off we’ve seen in credit continues,” he said.

Small afternoon bounce

Some low-beta spreads from Latin America managed to finish the day unchanged, as some risk appetite returned and some assets saw a bounce, a New York-based trader said.

Brazil’s CDS closed at 249 bps while Mexico’s moved to 129.50 bps.

Venezuela remained weak, though flows improved, he said.

© 2015 Prospect News.
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