Fibra Uno, Terrafina, Iraq, Chexim deals on deck; equity rally tightens some EM spreads

By Christine Van Dusen

Atlanta, Sept. 8 – Mexico’s Fibra Uno, Mexico’s Cibanco SA Institution de Banca Multiple, Trust F/00939 (Terrafina), Iraq and Export-Import Bank of China advanced deals on Tuesday as a rally in equities helped boost some emerging markets bonds.

Asian bonds, however, put in a very muted morning session on Tuesday, following weak but unsurprising economic data from China, a London-based trader said.

“Oil was on its back foot after the initial rally, as hopes of cooperation between OPEC members to curtail production disappear,” he said. “The macro picture still seems pretty weak, but we are starting to see some signs of stabilization here.”

As the day went on, the tone remained “fairly sluggish,” another trader said, “with spreads broadly unchanged to 3 basis points wider.”

Volumes and liquidity remained low across all sectors, he said.

“The EM asset class has a fairly bumpy road ahead, and it’s hard to build a bullish scenario which is very likely for EM,” a trader said. “So I guess any rally we do get should lag [developing markets].”

Notes from Indonesia saw “decent volumes,” another trader said.

“Early credit weakness and sluggish Chinese equities had Indonesia as much as ¼ point higher in the belly and long end while Asian high-grade credit widened 0 bps to 3 bps,” he said. “The afternoon recovery in the equity and high-grade credit markets saw sellers of sovereigns emerge, which stabilized late afternoon.”

From Turkey, bank paper was seeing some demand, another trader said.

“Turkey is trading sideways at the moment, but the lack of a positive catalyst will probably lead to underperformance,” he said.

Lat-Am quiet, Braskem weakens

Looking to Latin America, trading was slow and mostly quiet for corporates, a New York-based trader said.

Most investment-grade names from Brazil felt heavier, he said, while Braskem SA weakened after signing a naphtha supply contract with Petroleo Brasileiro SA.

“Braskem is a bit weaker, as signing another short-term naphtha deal with Petrobas won’t increase the comfort level in that credit,” he said. “It's a long-term deal that the market covets.”

Spreads tighten late in day

Low-beta spreads from Latin America tightened into the end of the day, another trader said.

Brazil’s five-year credit default swaps spreads closed at 372.50 bps from 380 bps, while Mexico’s finished at 148 bps from 150.50 bps.

“Cash prices are firm throughout the day, with Mexico outperforming as we largely dismiss Treasury weakness and instead focus on spread-tightening and the equity rally,” he said.

Venezuela, meanwhile, gave back some of the previous week’s gains, and Argentina built on its gains from the last weeks, he said.

PDVSA’s 2017s closed Tuesday at 73¼ from 74¼, he said.

Middle East in focus

Bonds from the Middle East received some attention on Tuesday, with investors adding some in the morning before turning defensive in the afternoon, a London-based trader said.

“What is glaringly apparent is the technical nature of the market and the general lack of depth outside the bonds that continue to ‘tick the boxes,’” he said. “By ticking the boxes, I generally mean sukuks, or solid senior bonds generally out to 10 years.”

Fibra Uno on roadshow

Mexico-based commercial real estate developer and operator Fibra Uno is on a roadshow for a possible issue of notes, a market source said.

BofA Merrill Lynch, Credit Suisse, HSBC and Santander are the bookrunners for the deal.

The roadshow began on Monday and has traveled to London, Boston and Los Angeles. The marketing trip ends Wednesday in New York and Chicago.

Terrafina markets dollar notes

Mexico City-based real estate investment trust Terrafina began a roadshow on Monday for a dollar-denominated issue of notes, a market source said.

Citigroup is the lead coordinator and Barclays and Citigroup are the joint bookrunners for the Rule 144A and Regulation S deal.

Iraq roadshow ahead

Iraq will set out on Thursday for a roadshow to market its $6 billion notes program, a market source said.

Citigroup, Deutsche Bank and JPMorgan are leading the marketing trip.

An issue of $500 million notes could follow.

Chexim to issue notes

China’s Chexim is planning to price a benchmark-sized issue of dollar-denominated notes this week, a market source said.

Bank of China, Barclays, Bocom HK Branch, HSBC, JPMorgan and MUFG are the joint global coordinators for the Rule 144A and Regulation S deal. ANZ, Bank of China, Barclays, Bocom HK Branch, HSBC, ING, JPMorgan, MUFG and Westpac are joint lead managers and joint bookrunners.

Investor calls began on Tuesday.

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