Slovenia sells notes; oil prices put pressure on energy bonds; Brazilian scandal affects Lat-Am

By Christine Van Dusen

Atlanta, July 21 – Slovenia sold notes on a Tuesday that saw oil prices dip, putting some pressure on energy company bonds from China and pushing spreads for some Latin American credits wider.

Asian bonds traded on Tuesday morning unchanged to 3 basis points tighter, a London-based trader said, with the curves for China-based Cnooc Ltd. and China Petroleum & Chemical Corp. (Sinopec Group) widening by a couple of basis points before recovering back to unchanged.

“Financials are a touch firmer,” he said. “Korea was calm.”

And notes from India “continued to grind in, and closed 1 bp to 3 bps tighter,” he said. “Bharti Airtel traded at 195 bps to close at 194 bps bid, 198 bps offered, 3 bps tighter.”

Indonesia’s 2045 was seen at 96.15 after the morning’s Treasury rally, another trader said.

“The market turned a touch weaker in the afternoon session, given the quick Treasury rally,” he said.

In other trading, prices for sovereign bonds from Ukraine have moved about ¼ point down on slightly lower offers so far this week, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“The rest of the market was quiet, with interests in quasi-sovereign banks,” he said.

Looking to the Middle East, spreads were mixed, with some demand seen for the belly of the Dubai curve, as well as for some Dubai-based corporates, another trader said.

“Burgan Bank’s 2020 was about the worst performer in this space over the month,” he said. “They’ve really been suffering, pushing 43 bps wider.”

Lat-Am investors ‘guarded’

Investors in Latin American debt have become “a little guarded” as a result of scandal-related choppiness in Brazil, a New York-based trader said. High-grade names from Brazil were trading very infrequently, he said.

On Monday, Brazil-based Braskem SA’s chairman was indicted for allegedly participating in corruption related to Petroleo Brasileiro SA (Petrobras).

“Braskem is much weaker,” a trader said. “Petrobras continues to widen, for the third straight day.”

Iron ore rebounds

Vale SA widened even more, the New York trader said, after iron ore made a big rebound.

Still, credit default swaps spreads for Brazil managed to tighten, moving in to 266 bps from 275 bps, while Mexico’s narrowed to 126 bps from 129 bps.

“Cash prices do underperform CDS, and the Treasury rally has levels just bouncing around a range after popping earlier in the session,” he said.

Venezuela’s 2027s closed higher while PDVSA’s 2017s dipped.

“Markets continue to be thin as we navigate summer months,” he said. “This week should continue to be lackluster in the absence of any tier I economic data. Next week we should see a pick-up as the Fed takes center stage.”

Colombia softens

Banks from Colombia softened, with some seeing only small sellers, the New York trader said.

The support that Mexico-based Cemex SAB de CV saw last week disappeared by Tuesday, he said, though investors remain comfortable with the credit.

Latin America-focused Pacific Rubiales Energy Corp. was a “bright spot,” another trader said. The notes closed up more than 1 point, with the 2025s outperforming.

“Considering how quiet it’s been, liquidity hasn’t been terrible, to be honest,” he said. “And even though we traded in a guarded way today, overall it still feels constructive.”

Slovenia prices bonds

In its new deal, Slovenia sold €1.25 billion 2 1/8% notes due in July 2025 to yield 2.251%, or mid-swaps plus 115 bps, a market source said.

The notes were initially talked at a spread of 120 bps.

Barclays Capital, Credit Agricole CIB, Deutsche Bank and JPMorgan were the bookrunners for the Regulation S deal.

The deal was initially expected to include a 30-year tranche, but plans for that issue were dropped.

CCB sets talk

China’s CCB Financial Leasing Corp. Ltd. set initial talk for a dollar-denominated issue of notes due in five years at Treasuries plus 125 bps, a market source said.

CCB International, HSBC, Morgan Stanley and Standard Chartered Bank are the joint global coordinators, joint bookrunners and joint lead managers for the Regulation S deal.

ANZ, Citigroup, DBS Bank and UBS are joint bookrunners and joint lead managers.

The issuer is based in Beijing.

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