Primary hosts Turkey, UOB; risk assets rally, but Lat-Am does little; roadshows ahead

By Christine Van Dusen

Atlanta, March 2 – Turkey and Singapore’s United Overseas Bank Ltd. sold notes on a Wednesday that saw some better buying of emerging markets bonds, as risky assets rallied in the face of China’s economic woes.

“The positive news also seems to [outweigh] Moody’s revision of China’s outlook on the Aa3 rating to negative, from stable,” a strategist said. “The decision comes ahead of the National People’s Congress that will convene this Saturday to vote on the country’s five-year plan and set the GDP and budget targets this year.”

Meanwhile, the United Nations pushed peace talks for Syria to March 9.

“Over the last few days, the ‘cessation of hostilities’ brokered by Russia and the US, has widely held, although some violations were reported on both sides,” the strategist said. “The current situation is a major improvement versus in early February, when the first attempt to hold peace talks broke down amid a major offensive by the Syrian regime, supported by Russian airstrikes, around the city of Aleppo.”

Against this backdrop, risk appetite seemed to improve, a trader said.

“We are seeing real buying rather then spurts of short-covering, which is a good sign,” he said.

But sovereign debt from Latin America did “little on the day, and drifts wider on some names,” a New York-based trader said.

Brazil’s five-year credit default swaps spreads closed at 449 basis points from 445 bps, while Mexico’s was unchanged at 184 bps.

“Cash prices remain firm and gyrate between gains and losses throughout the session to finish essentially unchanged,” he said.

Lat-Am in focus

Venezuela was an exception, though, as a possible government shake-up sent the sovereign’s 2027s to 41.75 from 38.75 and PDVSA’s 2017s to 53.75 from 50.

“Good two-way flows for the session with not a whole lot of conviction seen either way as the market consolidates at these new levels,” a trader said. “With Asia largely stabilizing and North American markets sound as well, EM participants have been given the green light to bid up risk and reach for yield.”

And Brazil’s Petroleo Brasileiro SA and Vale SA were up one to two points on Wednesday.

Buyers were seen for Colombia as the sovereign planned a roadshow for a possible issue of notes, a trader said.

BBVA, Goldman Sachs and JPMorgan are leading the trip, which starts March 8.

The bonds were “unchanged in the belly, and the long end outperformed,” he said.

Buenos Aires sets roadshow

Buenos Aires will depart on Friday for a roadshow to market a potential issue of notes, a market source said.

Citigroup, HSBC and JPMorgan are the bookrunners for the deal.

The roadshow will end on March 9.

Argentina nears deal

In other news from Argentina, lawmakers look ready to approve legislation that would return the country to the international capital market, according to a report from Schildershoven Finance BV.

The sovereign is closer to a deal with holdout creditors, the report said.

“Argentinean investors continue to benefit from the progress in the debt case negotiations,” the report said. “Previously, during the negotiations with debt holders, [Argentina’s president] reached a deal with holdouts. According to the deal, the government must pay $4.65 billion to the active group of holdouts. The same accord with other creditors will bring the total amount to be paid to $15 billion.”

The country’s Congress and Senate are expected to make a decision by the end of the month.

“It is highly expected the president’s proposal would pass and the country would put an end to its long debt default story,” Schildershoven said. “It could trigger a wave of credit rating upgrades and will return the country to the international capital market. This news is positive for the Argentinean bond market.”

IRSA to issue notes

Also from Argentina, Buenos Aires-based real estate company Inversiones y Representaciones SA (IRSA) received approval from its board of directors to issue up to $470 million of global notes, according to a company filing.

Other details were not immediately available on Wednesday.

Turkey prices bonds

In its new deal, Turkey priced $1.5 billion of notes due in October 2026 at a yield of 5%, a market source said.

BofA Merrill Lynch, Citigroup and Deutsche Bank were the bookrunners for the Securities and Exchange Commission-registered deal.

Other details were not immediately available on Wednesday.

Meanwhile, the new issue of notes from Turkey’s Yapi ve Kredi Bankasi AS (Yapi Kredi) – $500 million 8½% notes due 2026 that priced Tuesday at 99.50 to yield 8 5/8% – traded Wednesday morning at 101.10 bid, 101.40 offered, a trader said.

BofA Merrill Lynch, Citigroup, MUFG Securities and UniCredit Bank were the bookrunners for the Rule 144A and Regulation S deal.

Turkey, Yapi get attention

Turkey’s new deal came “hot on the heels of the Yapi [deal],” a trader said. “Yapi rallied hard on the break to settle at 101 bid, 101.50 offered.”

He sees some room for tightening, but the “focus has moved to the new 10-year sovereign,” he said. “Turkey sovereign deals have a habit of signaling the end of a rally.”

UOB sells notes

In another new deal, Singapore’s United Overseas Bank priced a €500 million issue of ¼% notes due March 9, 2021 at 99.653 to yield mid-swaps plus 32 bps, a market source said.

BNP Paribas, Commerzbank, DZ Bank, HSBC, Natixis, UBS and UOB were the bookrunners for the Regulation S deal.

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