EM volumes lighten; Lat-Am bonds move wider; perpetuals stay popular; Mexico on deck

By Christine Van Dusen

Atlanta, Jan. 12 – Volumes were thinner than the previous week for emerging markets bonds as investors dealt with declining oil prices, the move in U.S. Treasuries and Russia’s downgrade.

“Volumes, overall, are lighter then prior days,” a New York-based trader said. “Eyes are still on the oil move lower, U.S. Treasury rally, the weaker equity markets and increased volatility. Hopes remain this will all settle down, we can drag money into the asset class chasing some spread and yield and that the poor liquidity does not discourage new money from the asset class.”

From Russia, bonds weren’t suffering much on Monday on the back of a new downgrade to BBB- from Fitch Ratings, a London-based analyst said.

“We’re not expecting too much of an impact,” he said. “We see the downgrade more as a catch-up to the other agencies.”

In other news from the region, leaders from Russia, Ukraine and European nations met during the weekend and were expected to continue talking on Monday, he said.

“There remains the possibility of a meeting that would include President Putin later this week, but we are still awaiting confirmation of this,” he said. “Comments from both Russia and Europe recently suggest tensions are calming. But we still think it’s too early to anticipate any sort of major resolution.”

Indeed, fighting was reported in Ukraine during the weekend.

“Russia’s credit default swaps are 5 basis points wider this morning ... largely driven by oil prices opening weaker but largely shrugging off the Fitch downgrade,” he said. “Not much trading in oil and gas names yet.”

New deals ahead

In deal-related news, investors were keeping an eye new deals ahead for Mexico, China Construction Bank (Asia) Corp. Ltd. and Korea Export-Import Bank (Kexim).

“Plenty of other global factors to keep investors busy with, as we move ever closer to the Greek election and the potential introduction of the European Central Bank’s quantitative easing,” the analyst said.

Lat-Am widens

Bonds from Latin America ended Monday a bit wider, a New York-based trader said.

“It seems the market is now pricing in the recent ability to raise some funding from China as a signal they will make the payments on debt through 2015,” he said.

Venezuela-based PDVSA’s 2015 bonds finished the day up in the 84 area from 79, he said.

Perpetuals get attention

Looking to the Middle East, bonds were not as active as they were during the previous week, but there were “pockets of interest,” a London-based trader said.

Perpetual bonds were in one of the pockets, led by Dubai Islamic Bank PJSC’s notes, which closed at 99.37 bid, 99.87 offered on Friday and opened at par bid on Monday before hitting a high of 101 and closing at 100¼ bid, 100½ offered.

“They are on the road at the moment,” he said, referring to the lender’s roadshow for a dollar-denominated and benchmark-sized issue of Islamic bonds.

HSBC and Standard Chartered Bank are the joint structuring banks and Al Hilal Bank, Dubai Islamic Bank, Emirates NBD Capital, HSBC, National Bank of Abu Dhabi, Noor Bank, Sharjah Islamic Bank and Standard Chartered Bank are the joint lead managers for the Regulation S deal.

The roadshow ended Monday.

Qatar steadies

Spreads for Middle Eastern bonds moved slightly wider on Monday as a result of the decline in oil prices and the Treasury move, the London trader said

Meanwhile, Qatar – which has a large redemption set for next week – was steady in trading, as was Qatari Diar and its 2020 notes, he said.

“Bahrain 2022s and 2023s retain decent support and demand,” he said. “Dar al Arkan Holdings was active with retail investors. The 2015 matures in about one month.”

Turkey tightens

From Turkey, credit default swaps started Monday’s session about 1 bp tighter, the analyst said.

“Overall, Turkey is still benefitting from lower oil prices, and we continue to see good trading activity in the country,” he said.

Bonds from Central and emerging Europe were mostly quiet, though spreads were wider by 5 bps to 8 bps on Friday’s Treasury move, he said.

Asia in focus

Asian bonds were weaker at the start of the session on Monday, with high-grade bonds widening 2 bps to 5 bps, as investors readied for new deals.

The new issue of notes from China’s Huarong Asset Management Co. Ltd. received some attention in trading on Monday.

The Beijing-based lender sold $3.2 billion of notes in three tranches due in 2018, 2020 and 2025, a market source said.

The $1.4 billion notes due 2025 that priced at Treasuries plus 360 bps, following talk of a spread of 370 bps, traded down on before rebounding into the Asian close, a trader said.

Credit Suisse, Standard Chartered Bank and Wing Lung Bank were 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 were the joint bookrunners and joint lead managers for the Regulation S deal.

“China oil corporates held in, unchanged, despite oil continuing on its downward path,” he said. “China high-grade property names were 5 bps to 10 bps wider.”

Malaysian names wider

Bonds from Malaysia and its corporates were 3 bps to 8 bps wider, with sellers spotted.

Curves for high-yield sovereigns were unchanged to ¼ point higher, a trader said.

“Indonesia’s 2045 traded to highs of 100¼, closing at par bid, 100¼ offered,” he said.

Asian property bonds

In other trading from Asia, high-yield property companies from China saw their bonds close between ½ point and ¾ point higher amid mostly buying, a trader said.

This came as Kaisa Group showed “no signs” of paying their coupon, he said.

“But retail demand remained solid,” he said.

China’s Logan Property Holdings Co. Ltd. rallied, he said.

China Construction sets talk

China Construction Bank set talk at Treasuries plus 195 bps for a five-year issue of notes, a market source said.

No other details were immediately available on Monday morning.

The issuer is based in Beijing.

Kexim gives guidance

Korea’s Kexim gave guidance for a two-tranche issue of dollar-denominated notes due in five and 10 years, a market source said.

The five-year notes were talked at a spread of Treasuries plus 105 bps.

The 10-year notes were talked at a spread of Treasuries plus 120 bps.

BofA Merrill Lynch, Barclays, Citigroup, Deutsche Bank, HSBC, JPMorgan and RBS are the bookrunners for the Securities and Exchange Commission-registered deal.

Mexico to issue notes

Mexico set talk for a two-tranche issue of notes due in 2025 and 2045, a market source said.

The tap of Mexico’s 3.6% notes due in 2025 was talked at Treasuries plus 175 bps.

The benchmark-sized notes due in 30 years were talked at a spread of Treasuries plus 225 bps.

BofA Merrill Lynch, Credit Suisse and Morgan Stanley are the bookrunners for the new deal.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.