Notes from Buenos Aires; Ukraine, Russia conflict at critical juncture; Asian names narrow

By Christine Van Dusen

Atlanta, Feb. 11 – The City of Buenos Aires printed new notes on Wednesday as trading activity for Latin American bonds decreased and negotiations for a Ukraine peace deal entered their final day.

“Today should see the leaders of the four countries – Russia, Ukraine, France, Germany – meet face to face,” a London-based analyst said. “It appears that the talks will be mainly focused on creating a demilitarized zone, rather than signing any formal document.”

Meanwhile, the United Kingdom kept open the possibility of sending arms to Ukraine, Russian officials claimed that the United States wanted to force a regime change and the International Monetary Fund discussed a $40 billion aid package for Ukraine while the sovereign reportedly asked Russia to restructure the debt it owes.

“At the same time, Russia started unplanned military exercises in the Crimea and there were reports of further violence in Ukraine – perhaps not the ideal backdrop to peace talks,” he said.

But, in better news, Russian assets rallied on Tuesday night on news that Presidents Obama and Putin spoke about pursuing peace. On Wednesday morning, credit default swaps spreads tightened 3 basis points.

Spreads for Central and emerging Europe were mostly unchanged on Wednesday morning after widening as much as 10 bps on Tuesday, he said.

From Asia, high-grade bonds closed Wednesday’s session about 2 bps to 5 bps tighter, with some high-grade property companies in the mix, a London-based trader said.

“Korea spreads closed unchanged or a couple bps tighter,” he said.

High-yield property companies from China closed the Asian session unchanged to ¼ point higher, he said.

From the Middle East, most names opened unchanged on Wednesday and perpetuals received some support, a trader said.

“We saw sellers in the long end, with investors taking profit after recent gains,” he said. “Spreads were generally a little tighter on the rates move, however, yesterday.”

Lat-Am in focus

Focusing on Latin America, Venezuela’s 2026 traded down at 41.90 on a slower but “constructive” trading day for assets from the region, a New York-based trader said.

Impacting bonds from Latin America were the moves in oil prices, the moves in U.S. rates and the individual challenges facing particular issuers, he said.

Brazil-based Petroleo Brasileiro SA (Petrobras) and Vale SA saw their bonds move about 5 bps to 7 bps on light volumes while Cencosud SA moved higher on the back of stable U.S. rates.

Colombia’s Ecopetrol SA was weaker as oil prices dropped off again, but the performance on its curve is still solid, he said.

Meanwhile, Odebrecht SA saw good two-way trading, he said, and banks from Colombia ticked lower while banks from Mexico and Chile remained bid.

And Mexico’s Cemex SAB de CV moved higher on positive results and the announcement of an asset sale, he said.

Banks see demand

Taking a closer look at the Middle East, high-yield names traded heavy and names like Kuwait Energy and its 2019s didn’t receive much support, a London-based trader said.

“Flow-wise today there was good demand for banks, with National Bank of Abu Dhabi PJSC 2020s tightening again,” he said. “Qatar National Bank was popular.”

Evergrande lacks support

In other trading on Wednesday, China-based Evergrande Real Estate Group Ltd.’s new 12% notes due 2020 that priced Tuesday at par opened at 99½ before trading between 99 3/8 and 99 5/8, then closed at 99½ bid, 99 7/8 offered, a trader said.

JPMorgan, Credit Suisse, Deutsche Bank and China Merchants Securities were the bookrunners for the Regulation S deal.

The proceeds will be used to refinance existing indebtedness.

“Lacked support in the secondary,” he said.

Philippines up from reoffer

Among Asian sovereigns, Philippines’ 2040s traded at 105½ while its 2024s were seen at 110 3/8 bid, 110 5/8 offered, a trader said.

The 3.95% notes priced in January at par to yield Treasuries plus 142.3 bps via Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Standard Chartered Bank and UBS in a Securities and Exchange Commission-registered deal.

“The Indonesia curve was resilient, with the curve ¼ point lower,” he said. “Indonesia’s 2025 traded down at 101 3/8, was last up at 101½ and closed at 101¼ bid, 101½ offered.”

Buenos Aires sells bonds

In its new deal, Buenos Aires priced $500 million 8.95% notes due Feb. 19, 2021 at par to yield 8.95%, a market source said.

The notes were initially talked at a spread in the 9¼% area.

The proceeds will be used for debt refinancing

BofA Merrill Lynch, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

Petronas to print sukuk

Malaysia’s Petroliam Nasional Bhd. (Petronas) is looking to issue between $5 billion and $7 billion of Islamic notes, a market source said.

BofA Merrill Lynch, CIMB and Deutsche Bank are the bookrunners for the deal, which is expected to price during the first half of this year.

The Kuala Lumpur-based issuer is Malaysia’s state oil company.

Korea Hydro seeks issuance

Korea Hydro & Nuclear Power Co. Ltd. is looking to issue five-year and 10-year notes, a market source said.

Other details were not immediately available on Wednesday.

Korea Hydro is a Seoul, South Korea-based subsidiary of Korea Electric Power Corp.

Notes from ADB

On Tuesday, Philippines-based Asian Development Bank priced $2.25 billion 1 7/8% notes due Feb. 18, 2022 with a 1.912% yield, or a spread of Treasuries plus 115 bps, according to a company announcement.

BofA Merrill Lynch, Morgan Stanley, RBC CM, TD Securities were the lead managers. BNP Paribas, Credit Agricole, Credit Suisse, Deutsche Bank, HSBC, Mizuho Securities, Nomura Securities, SMBC Nikko and Standard Chartered Bank were the other bookrunners for the deal.

Asian Development Bank is an international development finance institution based in Manila.

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