Investors show caution; Turkey sentiment improves; Saudi Arabia busy in trading

By Christine Van Dusen

Atlanta, March 17 – Emerging markets assets remained mostly solid while investors showed caution on Friday, following the results of the Dutch election and the Federal Reserve’s decision to hike rates.

“With the key events for the week now behind us, we’re looking into a calmer day towards the weekend,” a London-based analyst said Friday morning. “While there is some data from the United States and eurozone, the focus will be on political gatherings, with G20 Finance Ministers and central bankers meeting in Baden-Baden. Moreover, German Chancellor Merkel is scheduled to meet U.S. President Trump, after the initial planned meeting on Tuesday was postponed due to storm Stella.”

Looking to Turkey, the Central Bank raised the late-liquidity window rate again, in line with consensus, the analyst said.

“This is expected to increase the cost of funding for commercial banks by 40 basis points to 50 bps to around 11.2% to 11.3%,” he said.

The move still managed to boost sentiment, he said.

In trading from the Middle East, bonds from Saudi Arabia saw some activity.

“It was a volatile week in oil markets, driven by the OPEC monthly oil market report that saw stocks increasing globally while Saudi Arabia had also reported a bounce in production numbers,” the analyst said.

The sovereign’s 2 3/8% notes due in 2021 that priced at 99.007 to yield 2.588%, or Treasuries plus 135 bps, traded Friday at 97.56 bid, 97.81 offered.

The 3¼% notes due in 2026 that priced at 98.679 to yield 3.407%, or Treasuries plus 165 bps, moved to 96 bid, 96.35 offered.

Saudi Arabia dips

Saudi Arabia’s 4½% notes due in 2046 that priced at 98.015 to yield 4.623%, or Treasuries plus 210 bps, were spotted at 97.37 bid, 97.87 offered on Friday.

Citigroup, HSBC, JPMorgan, Bank of China, BNP Paribas, Deutsche Bank, Goldman Sachs, MUFG Securities, Morgan Stanley and NCB Capital were the bookrunners for the Rule 144A and Regulation S deal.

Asia starts out quiet, firm

From Asia, investment-grade corporates were very quiet in the morning, a trader said.

“Spreads, in general, are from unchanged to 1 bp tighter, with a better bid for Indian and Southeast Asian names,” he said. “Some profit-taking continues across shorter-dated China and Hong Kong names but in small size only.”

Investment-grade bonds from the region closed unchanged to 1 bp tighter.

Financial names from Asia were also subdued, another trader said.

“High-beta names generally well-supported,” he said. “High-yield sovereigns are unchanged, with Indonesia’s long end slightly better bid.”

Those sovereigns were firm at the end of the Asian session, another trader said.

Activity picks up

As the session went on, activity among Asian bonds picked up slightly and spreads tightened, another trader said.

“High spread and duration in demand, with Indian corporate 10-years moving another 2 bps to 3 bps tighter,” he said. “We also saw buyers of Korean 10-year corporates.”

Sentiment remained “very firm overall, although we still see some profit-taking in low-beta issues,” he said. “Indian banks continue to see good two-way in the short end, with more paper coming out, while the five-year bucket remains well-offered.”

Mexico prices notes

On Thursday, Mexico priced $3.15 billion of 4.15% notes due March 28, 2027 at 99.676 to yield 4.190%, or Treasuries plus 165 bps, according to a filing from the sovereign.

Barclays, Deutsche Bank and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for refinancing, repurchasing or retiring of debt; for redeeming its outstanding 5.95% notes due March 2019; and for general governmental purposes.

The final total size is $3,150,415,000, increased slightly from $3,148,339,000 announced earlier.

Mexico said that the original total size of $3,148,339,000 included $748,339,000 that will be used to fund preferred tenders in the sovereign’s concurrent tender offer for 10 series of notes. It said that figure may be adjusted, depending on the final acceptance level.

Gazprom does deal

Also on Thursday, Russia’s OJSC Gazprom – via Gaz Capital SA – priced $750 million 4.95% notes due March 23, 2027 at par to yield 4.95%, according to a market source and an announcement from the company.

The notes were talked at a yield in the 5¼% area.

Gazprombank, JPMorgan, Mizuho Securities and SMBC Nikko were the bookrunners for the Rule 144A and Regulation S deal.

Gazprom is a Moscow-based natural gas producer.

© 2015 Prospect News.
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