Sid Banka sells notes; Brazil outlook cut creates volatility; risk appetite begins to recover

By Christine Van Dusen

Atlanta, July 28 – Slovenia’s Slovene Export and Development Bank (Sid Banka) sold notes on a choppy Tuesday that saw U.S. Treasury yields rally and risk appetite slowly improve ahead of a two-day Federal Reserve meeting.

Notes from Asia closed the day mostly unchanged amid a slightly better tone, a London-based trader said.

Selling pressure lessened, he said, and recent issues saw “decent squeezing.”

China Minmetals Corp.’s new 3½% five-year notes that priced at 99.501 to yield 3.61%, or Treasuries plus 195 basis points, traded at 251 bps on Tuesday.

The company’s other new tranche – 4¾% notes due 2025 that priced at 99.858 to yield 4.768%, or Treasuries plus 245 bps – moved to 205 bps bid, 200 bps offered.

Deutsche Bank, HSBC, JPMorgan, ICBC and Citigroup were the bookrunners for the Regulation S deal.

The curve for oil-related companies from China was quiet, but about 2 bps wider, he said.

“Korea was mixed,” he said.

The recent issue of 3½% notes due 2020 that India’s Adani Ports and Special Economic Zone Ltd. sold at 99.524 to yield Treasuries plus 195 bps traded at 205 bps on Tuesday before moving to 200 bps, he said.

BofA Merrill Lynch, Barclays Capital, Citigroup and Emirates NBD Capital were the bookrunners for the Rule 144A and Regulation S deal.

“The rest of the sector was a couple basis points wider, with ongoing demand in the short end,” he said.

At the end of the day, the tone improved slightly, a trader said.

“Asian sovereigns are seeing support here, in the Indonesia and Philippines long end,” he said.

Brazil weakens

Bonds from Brazil started off on weak footing on Tuesday after Standard & Poor’s lowered its outlook for the country’s foreign-currency debt.

The rating agency revised its outlook to negative from stable and affirmed the country’s ratings. It said there is increased possibility of downside for the country because of execution risk in the policy changes under way.

The picture for the country’s bond prices improved at midday, a New York-based trader said. The sovereign’s 2025s and 2045s were outperformers while some dollar-denominated bonds on the long end were under pressure.

Five-year credit default swaps spreads for Brazil closed Tuesday at 292 bps from 300 bps, while Mexico’s finished the day at 137 bps from 143.50 bps.

Brazil-based Petroleo Brasileiro SA’s notes have widened as much as 40 bps since Thursday, he said.

Corporates from Brazil, which “took a hard leg down yesterday,” ticked a little bit higher on Tuesday, he said.

Lat-Am in focus

Trading of notes from Mexico was quiet, with very poor liquidity. Only the 2017s traded well, the New York trader said.

Among corporates from Mexico, Petroleos Mexicanos SAB de CV saw its 2020s and 2026 catch a decent bid, he said.

And Latin America-focused Pacific Rubiales Energy Corp., which dropped 3 points on Monday after a downgrade from Fitch Ratings, moved a little bit lower on Tuesday amid thin volumes.

Bonds from Colombia “traded poorly,” another trader said, with only the 2024s seeing any volume and closing about 7 bps wider. Colombian banks also weakened.

“The contagion seen last week is still visible in some credits, while others seem to have a force-field around them,” he said.

Indeed, notes from Chile, Peru and Mexico have performed “admirably,” he said.

Spreads tighten

At the end of the session, low-beta spreads for some Latin American bonds moved tighter as risk appetite began to creep back, another trader said.

PDVSA’s 2017s closed at 64.25 from 63, and Venezuela’s 2027s finished at 39.85, from 40.25.

Argentina, meanwhile, continued to trade “poorly,” he said, “with few prints.”

“Volumes today were heavily concentrated in Brazil, with large swings pre- and post-S&P press release,” he said. “Away from Brazil, flows were two-way and volume did pick up a touch. Tomorrow all eyes will be on FOMC, which will likely be the catalyst markets are looking for to propel into the next direction.”

Sid Banka sells bonds

In its new deal, Slovenia’s Sid Banka priced €300 million 7/8% notes due Aug. 4, 2018 at 99.682 to yield 0.983%, or mid-swaps plus 80 bps, a market source said.

Deutsche Bank, JPMorgan and Raiffeisen Bank were the bookrunners for the Regulation S deal.

Sid Banka is a lender based in Ljubljana, Slovenia.

Shinhan releases book

The new deal from South Korea’s Shinhan Bank – RMB 1.2 billion 4.2% notes due Aug. 6, 2018 that priced Monday at par to yield 4.2% – drew a final order book of RMB 2.5 billion from 60 orders, a market source said.

The notes were talked at a yield in the 4.3% area.

About 50% of the deal was bought up by banks, 43% by asset and fund managers, 6% by private banks and 1% from others.

HSBC and Standard Chartered were the bookrunners for the Regulation S deal.

On Tuesday the notes were spotted in the secondary market at 100.20 bid, 100.30 offered.

China Merchants gets orders

China Merchants Finance Co. Ltd.’s two-tranche issue of $700 million notes due Aug. 3, 2020 and 2025 drew a final order book of about $2.3 billion, a market source said.

The deal included $200 million 3½% notes due 2020 that priced at 99.795 to yield 3.545%, or Treasuries plus 195 bps. The notes attracted $1.1 billion from 60 orders.

The $500 million 4 ¾% notes due 2025 priced at 99.748 to yield 4.782%, or Treasuries plus 255 bps. The notes drew $1.2 billion from 66 orders.

BofA Merrill Lynch and China Merchants Securities were the bookrunners for the deal.

The issuer is based in Shenzhen.

© 2015 Prospect News.
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