Tunisia eyes new five-year notes; Chile’s Cochrane pulls deal; Mabe, Al Candelaria price

By Rebecca Melvin

New York, Oct. 18 – Emerging markets debt ended lower on Friday following positive action earlier in the week despite worries about the geopolitical tensions between the United States and Saudi Arabia.

Amid the weaker tone, Tunisia announced on Friday that it is planning to price a euro-denominated five-year note and has selected banks and scheduled a roadshow to market the deal starting on Monday.

Fitch Ratings assigned the upcoming Tunisia deal an expected rating of B+, which is in line with Tunisia’s B+ long-term foreign currency issuer default rating with a negative outlook.

Empresa Electrica Cochrane SpA, which had initiated price talk on Thursday for a proposed $725 million of 16-year notes, pulled the deal, according to a New York-based market source. The bond had been talked to yield mid- to high-6%.

The Chilean electricity company was the only entity out of five that waded into the market on Thursday that did not price as the tone turned mixed. The other deals that priced despite the turbulence included JBS SA’s $500 million of 7% seven-year notes, Al Candelaria’s $650 million of 7˝% 10-year notes, Controladora Mabe SA de CV’s $370 million of 5.6% 10-year notes and the Republic of Panama’s $550 million tap of its 2050 notes.

The Cochrane casualty followed on ProCredit Holding AG & Co. KGaA’s postponement of a deal for new notes earlier in the week. Eastern Europe-focused ProCredit pulled back after going out with initial price talk as well.

Flows for emerging markets bond funds fell for a third straight week for the week ending Oct. 17, with both hard- and local-currency emerging markets funds down more than $500 million each, according to fund flows and asset allocation data tracker EPFR Global.

The redemptions came despite “encouraging signs” in the primary market that included oversubscribed sovereign sales by Turkey and Petroleos Mexicanos SAB de CV, Mexico’s state-run oil company, EPFR said.

In the broader markets, selling in equities continued on Friday after data showed China’s third-quarter gross domestic product was the weakest since 2009. Later the China stock indexes lifted on reassurances about the health of China’s economy being broadcast by government officials there.

China growth in the three months to the end of September slipped to 6.5% from 6.7% in the previous quarter, official data showed. But stocks rebounded late in the session.

Meanwhile, bond yields remained within their current range after having popped higher at the beginning of the month. The yield on the benchmark U.S. Treasury 10-year was about 3.2% at late afternoon Friday, which was higher on the day, but within striking distance of the 3.25% level notched this month, representing a seven-year high.

Looking ahead, market players are eyeing a primary calendar for next week that includes Brazil’s Investimentos e Participacoes em Infraestrutura SA, Latvia’s Mogo Finance SA and Islamic Development Bank.

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