Turkey prices add-on; oil prices dip, then see small bounce; Kaisa, Lat-Am, Bahrain active

By Christine Van Dusen

Atlanta, Jan. 7 – Turkey sold notes on a Wednesday that saw oil prices slide, then recover somewhat, keeping things tumultuous for emerging markets assets.

“The biggest challenge is not finding an offer, but accepting prices which seem a little too high from the open,” a London-based trader said. “Whether it’s Venezuela, Petroleo Brasileiro SA, Mexico, Russia, Turkey – it’s all one-way.”

Russia’s credit default swaps on Wednesday moved about 10 basis points wider, which actually represented a bounce from the 25-bps widening seen earlier in the session, a trader said.

Sovereign bonds from Russia were more stable, he said, moving between 1 bp and 4 bps wider.

Bonds from Ukraine continued to feel pressure as investors awaited this week’s International Monetary Fund meetings.

But notes from issuers in Central and Emerging Europe were firmer on Wednesday morning, following a little bit of buying on Tuesday, a trader said.

“Generally we are seeing good demand for higher-quality euro paper, helped by rising expectations of euro zone quantitative easing,” he said.

From the Middle East, investors showed support for the 2022 and 2023 bonds from Qatar, a trader said. Abu Dhabi paper also got some attention in trading.

“The long end feels less supported – the Bahrain curve is steepening – while perpetuals are more mixed,” he said. “Dubai Islamic Bank and Emirates NBD are a little lower.”

Spreads for bonds from Lebanon are about 40 bps to 50 bps wider on the month, he said, after recent selling from Exchange Traded Funds.

“High-yield names generally remain illiquid,” he said.

Asia in focus

Asian bonds on Wednesday widened between 3 bps points and 8 bps but saw some buyers emerge by midday, a London-based trader said.

Oil companies from China saw their notes move out 5 bps while property companies’ notes moved 3 bps to 5 bps wider, he said.

Corporate bonds from Malaysia were wider by about 5 bps and many finance and corporate issuers from South Korea widened between 3 bps and 5 bps.

Philippines notes trade up

The new issue of notes from the Philippines – $2 billion 3.95% notes due 2040 that priced at par to yield Treasuries plus 142.3 bps – traded up at 102.20 bid, 102.30 offered on Wednesday, a trader said.

Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Standard Chartered Bank and UBS were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used to fund purchases of foreign currency-denominated bonds and for general governmental purposes, including budgetary support.

The deal drew a final order book of more than $13.5 billion, with 47% from the United States, 41% from Asia and 12% from Europe.

Fund managers picked up 61%, banks 32%, insurance and pension funds 4%, central banks 2% and private banks 1%.

Kaisa sees trades

China’s Kaisa Group on Wednesday remained on radar screens, following downgrades from Moody’s Investors Service and Standard & Poor’s.

“The Kaisa complex opened 7 points to 10 points lower and rebounded down 2 points into midday on the back of retail demand,” the London trader said.

When Kaisa’s chairman resigned, it triggered a mandatory repayment of the company’s HK$400 million offshore loan on Dec. 31. Kaisa failed to repay it, Moody’s said, and now has a higher risk of default, which could trigger a cross-default on its offshore bonds.

“Very active on Kaisa Group today,” a London-based trader said. “I traded 2018s, 2019s, 2020s and 2016 [renminbi]. Good two-way flows.”

Lat-Am tightens

Bonds from Latin America started Wednesday’s session with a positive tone, with balanced flows and spreads tightening as much as 7 bps, according to a New York-based trader.

Dollar prices rose just slightly amid weakness in U.S. Treasuries.

High-yield names from the region were better-bid, with price stability finally emerging for Venezuela and PDVSA, he said.

PDVSA’s 2017s were spotted Wednesday morning at 52.40 after Tuesday’s low of 51. Venezuela’s 2027s traded Wednesday in the 41 area, versus Tuesday’s 40, he said.

Argentina’s bonds were mostly unchanged or a touch higher on Wednesday morning, with the Bonar 2024s moving from 96.75 to 96.80 and the Boden 2015s from 98.25 to 98.75, he said.

Brazilian corporates stand out

Later in the session, bonds from Brazil’s corporates improved, moving higher and seeing the bulk of the action, another New York-based trader said.

Bonds from Petrobras narrowed by about 35 bps while Vale SA’s spreads came in about 12 bps, he said.

Buyers emerged for Odebrecht SA at its lower levels, moving the bonds up a few points but still 10 points off the previous month.

Mexico-based Cemex SAB de CV’s bonds were quieter than on Tuesday, with firm bids, and Mexican high-grade companies strengthened, he said.

By the end of the day on Wednesday, Argentina’s bonds were performing well, he said.

Solid demand for Bahrain

Taking a closer look at the Middle East, Wednesday was an eventful day for the space, a London-based trader said.

Notes from Qatar were solid performers while high-grade names were a “mixed bag,” he said.

“Bahrain’s 2020 probably wins ‘bond of the day,’ closing at 108 bid on solid demand in the Street,” he said.

Turkey taps bonds

Turkey priced a $1.5 billion add-on to its 4 7/8% notes due April 16, 2043 at 98.858 to yield 4.95%, or Treasuries plus 241.5 bps, a syndicate source said.

The notes were talked at a yield in the 5 1/8% area.

Barclays, BNP Paribas and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general financing purposes, which may include the repayment of debt, according to a filing from the government.

The original $1.5 billion issue printed in April 2013, bringing the total size to $3 billion.

“It’s too early for them to win ‘deal of the year,’ but with the U.S. Treasury at 2.55% there is little room for regrets,” the London trader said.

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