Indonesia prints $4 billion of notes; U.S. oil prices boost EM bonds; Qatar, Turkey trade

By Christine Van Dusen

Atlanta, Jan. 8 – Indonesia printed $4 billion of new notes and Asian credits rebounded on Thursday, with high-grade cash bonds unchanged to slightly tighter and sellers emerging as U.S. oil prices rose slightly.

“We’re opening with a much firmer tone in [emerging markets] generally this morning, following yesterday’s rally in oil prices, helped by a surprise fall in U.S. crude stockpiles,” a London-based analyst said.

Oil companies from China fared particularly well, with spreads tightening 3 basis points to 5 bps and Cnooc Ltd.’s 2024s trading up.

Bonds from Malaysia firmed up, too, and South Korea’s were unchanged to 2 bps tighter, he said. Bonds from India moved 3 bps to 8 bps wider.

“The market, overall, is still very cautious, as most expect new supply to pile out, limiting room for spreads to tighten,” he said.

The new issue of notes from Indonesia caused the sovereign’s existing bond curve to be “very choppy,” he said. “The secondary curve was under pressure the entire morning, with Indonesia’s 2044s trading up at 124½ and down all the way to 123¼ before rebounding up to 123 5/8 before midday.”

Meanwhile, high-yield property companies moved no more than a half-point higher in bond trading on Thursday morning, a trader said.

From Russia, credit default swaps spreads opened 30 bps tighter while oil and gas names saw buyers, with bonds moving 5 bps higher, the analyst said.

Investors will now be looking to see whether Fitch Ratings joins the downgrade parade led by Standard & Poor’s and Moody’s Investors Service.

“We see a high chance of a downgrade, reflecting deteriorating growth prospects, capital outflows, falling reserves and the impact of oil prices on the governments financial situation,” the analyst said. “Nonetheless, we don’t feel a downgrade to BBB- will have much of an impact on spreads.”

Turkey gets attention

A lot of the day’s trading activity focused on the new issue of notes from Turkey, a $1.5 billion add-on to its 4 7/8% notes due April 16, 2043.

The notes priced at 98.858 to yield 4.95%, or Treasuries plus 241½ bps, following talk in the 5 1/8% area.

“The bonds opened at 99.85 first thing, bid-side, but dropped to 99 5/8 before rebounding to 99¾,” the analyst said.

Barclays, BNP Paribas and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general financing purposes, which may include the repayment of debt, according to a filing from the government.

The original $1.5 billion issue printed in April of 2013, bringing the total size to $3 billion.

Europe has strong showing

Bonds from Central and emerging Europe put in a fairly strong showing on Thursday, a trader said, on news that Germany could ease repayment terms for Greece.

That, plus, lower-than-expected economic data from the euro zone on Wednesday had investors pricing in expectations of quantitative easing, he said.

“Generally, CEE high-yield names are circa 10 bps tighter, with investment-grade circa 8 bps tighter.”

Qatar performs

From the Middle East, bonds from Qatar and its corporates led the way to firmness on Thursday morning, the analyst said.

“The oil bounce yesterday afternoon helped sentiment in the region, and Bahrain sovereign paper saw strong demand,” he said. “King Abdullah’s health remains a concern for the market, however.”

Some selling was seen into the close and money was put to work, which helped spreads perform, a trader said.

“Qatar has been very popular,” he said. “This performance, in turn, dragged Saudi Electricity Co. and Abu Dhabi tighter and higher.”

Perpetuals continued to lag, he said, but Dubai Aviation Corp. (FlyDubai) traded in “decent size” near par, after trading at 99 3/8 earlier in the week.

“Been an active week in Lebanon,” he said. “Quieter day expected tomorrow, where we can take stock of a pretty eventful opening week’s activity.”

Lat-Am in focus

Looking to Latin America, dollar prices moved higher in early trading on Thursday, a New York-based trader said.

High-yield bonds from Venezuela and PDVSA stayed strong, with prices up 2 points to 3 points and PDVSA’s 2017s moving to 57½ from 54½.

Low-beta spreads finished the session tighter “but well off their best levels of the session,” another New York trader said.

Dollar prices took a hit into the close, with ½’s 2025 closing at 100.30 from 101 and its 2045s at 98½ from 99¼. Mexico’s 2023s closed at 105 from 105.40 and its 2045s at 117.10 from 117½.

Philippines trades up

The new issue of notes from the Philippines –$2 billion 3.95% notes due 2040 that priced at par to yield Treasuries plus 142.3 bps – traded up at 102 1/8 bid, 102 3/8 offered, a market source said.

On Wednesday the notes were seen at 102.20 bid, 102.30 offered.

Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Standard Chartered Bank and UBS were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used to fund purchases of foreign currency-denominated bonds and for general governmental purposes, including budgetary support.

Indonesia sells bonds

In its new deal, Indonesia sold $4 billion notes due Jan. 15, 2025 and 2045 in a Rule 144A and Regulation S transaction, a market source said.

The $2 billion 4 1/8% notes due in 10 years priced at 99.393 to yield 4.2%, following talk in the 4¼% area.

The $2 billion 5 1/8% notes due in 30 years priced at 98.867 to yield 5.2%, following talk in the 5¼% area.

Citigroup, HSBC and Standard Chartered Bank were the bookrunners for the deal.

Fragrance Group prints notes

In a small deal on Thursday, Singapore’s Fragrance Group Ltd. sold S$85 million 3¾% notes due in 2017 at par to yield 3¾%, a market source said.

DBS was the bookrunner for the Regulation S issue.

The issuer is a property development and hotel operations company.

Huarong sets talk

China’s Huarong Asset Management Co. Ltd. set talk for a three-tranche issue of dollar-denominated notes due in three, five and 10 years, a market source said.

The three-year notes were talked at a spread of Treasuries plus 280 bps, the five-year notes at 320 bps and the 10-year notes at 370 bps.

Credit Suisse, Standard Chartered Bank and Wing Lung Bank are the joint global coordinators. ABC International, BOC International, Bocom International, CCB International, China Merchants Securities, Citigroup, Credit Suisse, DBS Bank, Deutsche Bank, HSBC, ICBC, Jefferies, Morgan Stanley, Standard Chartered Bank and Wing Lung Bank are the joint bookrunners and joint lead managers for the Regulation S deal.

The company is a state-owned asset manager based in Beijing.

“On the back of the announcement, [the company’s] 2019s traded down at 258,” a trader said. “The bonds were last at 273 bid, 263 offered.”

Roadshow for Religare

Singapore’s Religare Health Trust Trustee Manager Pte. Ltd. will set out on Jan. 12 to market a possible issue of dollar-denominated notes, a market source said.

DBS Bank, Deutsche Bank, Religare Capital Securities and Standard Chartered Bank are the bookrunners for the Regulation S transaction.

The Singapore-based business trust is managed by Religare Health Trust Trustee Manager Pte. Ltd., which is a wholly owned subsidiary of Religare Enterprises Ltd., a financial services group based in New Delhi.

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