New deal from Lithuania; EM assets remain firm; Petrobras suffers after Brazil downgrade

By Christine Van Dusen

Atlanta, Oct. 15 – Lithuania sold notes on a firm Thursday for emerging markets assets, as the prior day’s weak economic releases boosted emerging markets currencies and supported credit.

“Emerging markets remain firm, even with developed market risk under pressure as the United States growth story is stagnating,” a trader said. “Fed rate hike expectations are just being pushed further and further away.”

Sovereign bonds from Turkey were firm, even after the death toll rose from the recent bombing of a peace rally in Ankara and following news of a rise in the unemployment rate.

“Duration was generally bid,” another trader said. “As the curve had steepened, we saw good buying in the belly of the curve from clients and the Street paying in the long end.”

Turkish banks and corporates, which traded somewhat heavy at the start of the week, saw two-way activity with real-money accounts “lightening up into the elections on the rally and retail buying on dips,” he said.

From Asia, high-yield sovereigns tracked the move in Treasuries, with the Philippines curve moving up ½ point and the long end trading up as much as one point, another trader said.

“The Indonesia belly is up one point, the long end up 1¼ points,” he said. “Off-the-runs are playing some catch-up, as the on-the-run 2025 and 2045 are still difficult to source.”

Corporates from Asia outperformed, he said.

“Korea financials are unchanged,” he said.

Looking to Latin America, the market was a bit slow, with names like Brazil-based Petroleo Brasileiro SA (Petrobras) taking a hit after Fitch Ratings knocked Brazil down one notch.

“Bids are pulled back from yesterday’s closing levels,” a New York-based trader said. “Same with [Vale SA], which has been markedly quiet overall after decent volumes and inquiry last week.”

Colombia’s Ecopetrol SA moved higher on Thursday, with the 2026s and 2045s seeing the most action, particularly from buyers, the New York trader said.

Middle East in focus

Flows for Middle Eastern bonds have been balanced so far this week, a London-based trader said.

“Liquidity is testing, as each bond continues to have its own dynamics and technicals,” he said.

The best performers of the week, so far, have been Abu Dhabi National Energy Co.’s 2018s to 2024s, Dubai Holding’s 2017s and Iraq’s 2028s. The latter has bounced back 25 basis points this week, he said.

The trader was keeping an eye out for Qatar Islamic Bank SAQ’s upcoming sukuk.

“This is the first dollar supply from Qatar this year, amazingly enough, and being an Islamic bank and a sukuk, it should be placed OK,” he said.

Lithuania sells notes

Lithuania on Thursday priced a €1.5 billion issue of notes due Oct. 22, 2025 and 2035 in a Regulation S deal, a market source said.

The deal included €750 million 1¼% notes due 2025 that priced at 98.923 to yield 1.366%, or mid-swaps plus 43 bps.

The €750 million 2 1/8% notes due 2035 priced at 99.469 to yield 2.158%, or mid-swaps plus 69 bps.

BNP Paribas, Barclays and HSBC were the bookrunners for the transaction.

Kookmin releases final book

South Korea-based KB Kookmin Bank’s new issue of $500 million 2 1/8% notes due 2020 that priced at 99.529 to yield mid-swaps plus 90 bps attracted $800 million in orders from 32 accounts, a market source said.

BNP Paribas, Citigroup and Societe Generale CIB were the bookrunners for the Rule 144A and Regulation S deal.

About 51% of the orders came from the United States, 11% from Asia and 38% from Europe, the Middle East and Africa.

Asset and fund managers accounted for 40%, central banks and sovereign wealth funds 32%, banks 19% and pension funds and insurers 9%.

PZU draws orders

The final book for the new issue of notes from Poland’s Powszechny Zaklad Ubezpieczen SA – through PZU Finance –a €350 million add-on to its existing 1 3/8% notes due 2019 that priced at 99.218 to yield 1.593%, or mid-swaps plus 140 bps – drew an order book of more than €400 million, a market source said.

BofA Merrill Lynch, Deutsche Bank, Goldman Sachs International, Santander GBM and Societe Generale were the bookrunners for the Regulation S deal.

Investors from Poland accounted for 29% of the orders, Netherlands 23%, United Kingdom 19%, other Europe 19% and Germany and Austria 10%. Fund managers picked up 76%, insurers and pension funds 16%, others 5% and banks and private banks 3%.

The proceeds will be used for general corporate purposes, according to a filing from the company.

The total issue size is now €850 million.

© 2015 Prospect News.
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