Some EM bonds under pressure; China Oceanwide, Peking University, Sagicor, Indonesia price

By Christine Van Dusen

Atlanta, Aug. 4 – Many emerging markets bonds remained under pressure on Tuesday, even as the larger market’s tone improved and commodities recovered, after a Federal Reserve official said that it makes sense to hike rates in September.

Investors have been expecting the Fed to wait longer before instituting a rate increase.

In response to this and weakening U.S. Treasuries, Latin America low-beta spreads moved wider and cash prices gapped lower on Tuesday afternoon, a New York-based trader said.

Five-year credit default swaps spreads for Brazil moved to 304 basis points from 301 bps while Mexico’s moved to 138.50 bps from 138 bps. Mexico’s 2025s traded at 99.05 from 99.35 and its 2044s moved to 97 from 97.40, he said.

Still, some high-yield names from the region managed to make some small gains, as both Venezuela and Argentina moved higher, he said.

PDVSA's 2017 bonds closed at 66.5 from 66 while Venezuela’s 2027s moved to 41.25 from 41.15.

“Flows pick up in the face of increased intraday volatility,” he said. “Inquiries were skewed to better sellers for the most part.”

From Asia, investment-grade cash bonds were wider by 2 bps to 5 bps amid mixed flows on Tuesday morning, a London-based trader said.

“But we are seeing more outright sellers taking profit in the 10-year bucket while demand in the short end remains strong,” he said.

China-based Cnooc Ltd. saw its 2025s moving wider to trade at 177 bps while China Petroleum & Chemical Corp.'s (Sinopec Group) 2025s traded at 159 bps.

Meanwhile, the primary market on Tuesday hosted new deals from China Oceanwide Holdings Group Co. Ltd., China’s Peking University Founder Group Co. Ltd., Barbados-based Sagicor Financial Corp. and Indonesia.

Korea widens, India mixed

Bonds from Korea widened on Tuesday by between 1 bp and 3 bps, particularly five-year senior bank paper and 10-year corporates, a trader said.

“Short-end quasi-sovereigns remain well-bid,” he said.

Bonds from India were mixed, he said, with some profit-takers on the 10-year corporates.

“Levels are up or down 2 bps,” he said. “Malaysia closed a touch wider, but selling pressure decreased.”

Bradesco declines

In other news, bonds from Brazil’s Banco Bradesco SA declined on Tuesday after the lender agreed to buy HSBC’s Brazilian business.

“That is the largest acquisition for the bank, and the price of the deal is substantially higher than expected,” according to a report from Schildershoven Finance BV. “With HSBC’s assets, Bradesco will become the third-largest bank in the country.”

But the deal also hurts the bank’s Tier 1 capital, which could decline 2.8%, the report said.

“This announcement, market volatility and the Brazilian economic downturn negatively affected Bradesco’s bonds,” Schildershoven said. “Bond yields currently look interesting.”

Ukraine in focus

Looking to Ukraine, sovereign bonds have seen some profit-taking so far this week, said Fyodor Bagnenko, a fixed income trader with Dragon Capital.

“Banks kept going stronger without much resistance,” he said.

In other news from Ukraine, the bondholders for Oschadbank on Monday approved restructuring the company's eurobonds, a market source said.

The company will extend the maturity of its $700 million notes due 2016 by seven years, boost the coupon to 9 3/8% from 8¼% and repay 60% of the principal with a three-year delay. The rest will be paid in installments between 2019 and 2023.

Another $500 million bonds that were due in 2018 will now be due in 2025 and the coupon will be increased to 9 5/8% from 8 7/8%. There will also be a two-year delay in the payment of 50% of the principal and the rest paid in installments from 2020 to 2025, he said.

China Oceanwide sells notes

In its new deal, China Oceanwide Holdings Group sold $400 million five-year notes at par to yield 9 5/8%, a market source said.

Citic CLSA and UBS were the bookrunners for the Regulation S deal.

The proceeds will be used for overseas general corporate purposes, including project development.

The company is a real estate business based in Beijing.

Sagicor brings deal

Barbados-based Sagicor priced $320 million notes due in 2022 at a yield of 9 1/8%, a market source said.

The notes were talked at a yield in the low-9% area.

JPMorgan and Scotiabank were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for refinancing.

Other details were not immediately available on Tuesday.

The issuer is an insurance and financial services provider that focuses its business on Latin America and other markets.

Issuance from HNA

China’s HNA Tourism Group sold RMB 450 million two-year notes at par to yield 9¼%, a market source said.

ABC International, Haitong International, Orient Capital and JPMorgan were the bookrunners for the Regulation S deal.

HNA is a Beijing-based tourism services company.

Chinese tech company prices

China’s Peking University Founder Group priced a $185 million tap of its 5½% three-year notes at 100.25 to yield 5.4%, a market source said.

The notes were talked at a price in the 100.125 area.

The original notes – issued by Dawn Victor Ltd. – priced in May at par to yield 5½%.

DBS was the bookrunner for the new Regulation S notes, which will include a change-of-control put at 101%.

The proceeds will be used for working capital and general corporate purposes.

The issuer is a Beijing-based technology conglomerate.

Primary hosts Indonesia

Indonesia priced a three-tranche issue of ¥100 billion notes due Aug, 13, 2018, 2020 and 2025, according to an announcement from the sovereign.

The deal included ¥22.5 billion 1.08% notes due 2018 that priced at par, ¥22.5 billion 1.38% notes due 2020 that priced at par and ¥55 billion 0.91% notes due 2025 that priced at par.

SMBC Nikko Securities, Nomura Securities and Mizuho Securities were the bookrunners for the deal.

Buenaventura seeks issuance

Peru’s Compania de Minas Buenaventura is looking to issue debt sometime this year, a market source said.

Other details were not immediately available on Tuesday.

Buenaventura is a Lima, Peru-based precious metals mining company.

Sid Banka gives book details

The new issue of notes from Slovenia’s Slovene Export and Development Bank (Sid Banka) – €300 million 7/8% notes due 2018 that priced at 99.682 to yield 0.983%, or mid-swaps plus 80 bps – drew a final order book of €750 million from 61 accounts, a market source said.

About 36% of the orders came from Germany and Austria, 24% from the United Kingdom, 14% from Slovenia, 8% from Benelux nations, 6½% from other Europe, 6% from Italy, ½% from others and 5% from Central and emerging Europe.

Fund managers picked up 59%, insurers and pension funds 23%, banks 13% and others 5%.

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

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