Oil volatility to headline movement in emerging markets; Capex wrapping up roadshow

By Colin Hanner

Chicago, May 8 – In what could have been a catastrophic turn for emerging markets on Monday, the results of the French election followed what polls had clearly shown running up to the final vote, with Emmanuel Macron winning resolutely over Marine Le Pen on Sunday.

Yet, with markets relying on those polls ahead of the election, not much had changed Monday, and activity was on the weaker side for most of the day.

“With markets having already priced in much of a win and challenges still ahead” – a series of legislative elections in June – “actual gains have however been limited,” a market source said.

“It will be a relatively calm week, [versus] the previous one, despite what looks like a busy calendar,” the source said.

The volatility of crude oil prices has attacked markets on many fronts last week and will be one of the central tenets of the week ahead, market sources said.

“Concerns remain on the higher production from shale notably in the U.S., and the announcement” on Monday from Saudi Arabia’s Energy Minister calling for cuts into the second half of the year, which “failed to lift oil prices this morning further,” a market source said.

Some Middle Eastern sovereign bonds were higher on the day.

In Bahrain, its 7% notes due 2028 were higher by 8 basis points on Monday at 103.70 bid, 104 offered.

Kuwait’s 2¾% notes due 2022 were up 6 bps to 100.81 bid, 101.06 offered, while its 3½% notes due 2027 were up 7 bps to 101.87 bid, 101.99 offered.

LatAm lows

Argentina’s Capex SA, which announced last week it would issue new notes in connection with the start of a tender offer of any and all of its outstanding $200 million 10% notes due 2018, is on the road until Tuesday, a market source, and expects them to price mid-week at the earliest.

As for Latin America as a whole, trading volumes were extremely low in certain markets, a market source said.

“It’s very quiet,” a market source said. “Things are quieting down now that companies are in blackout,” referring to the period between now and when first-quarter figures will be released.

Periods like this are where you see more sovereigns get into the new issue mix, though that has been on the weak side as well, a market source said.

Petroleo Brasileiro SA will release its first-quarter figures on Thursday, and people are speculating that it may be coming to the market with a new deal soon, a market source said, though “it’s a name that can always come and, therefore, people are always rumoring it.”

On Monday, the company’s 8 3/8% notes due 2018 were quoted at 108¼ bid, 108½ offered.

And its 6¼% notes due 2024 were quoted at 103½ bid, 104 offered.

In Venezuela, Petroleos de Venezuela SA’s 8½% notes due 2020 were quoted at 74¾ bid, 75¾ offered, while its 5 3/8% notes due 2027 were quoted at 37¼ bid, 38¼ offered.

Mubadala trading

Abu Dhabi’s Mubadala Development Co. PJSC, which priced a dual-tranche issue early last month, was trading on Monday.

Those two issues were hovering around par on Monday. Its 3% notes due 2024 were quoted at 98.87 bid, 99.12 offered from its initial pricing of 99 5/8.

And its 3¾% notes due 2029 were quoted at 100.15 bid, 100.30 offered compared to its initial pricing of 99.981.

© 2015 Prospect News.
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