Turk Eximbank prices; trading ‘lackluster’; Lat-Am CDS widen; Gulf names get support

By Christine Van Dusen

Atlanta, Feb. 1 – Turkey’s Turkiye Ihracat Kredi Bankasi AS (Turk Eximbank) sold notes on a slow Monday for emerging markets assets, as investors remained focused on China’s economy, the price of oil and the state of equities.

“Lackluster Monday overall, with pockets of activity,” a trader said. “We started off typically, on a firm footing, before fading into the close.”

Some “light pressure” remained on names like Brazil-based Vale SA, which was recently downgraded, another trader said.

“Usual slow Monday morning,” he said. “Inquiry is light on the heels of those moves lower. Buyers seen last week will most likely become timid again as they try to stay in front of any exacerbated move lower.”

Said another trader: “Felt like a bit of contagion running through Latin American credit throughout the day.”

Brazil-based Gerdau SA was another Latin American corporate that moved lower on Monday.

“It looks to be well-offered in the Street, with bids pulled back,” he said.

Mexico-based Cemex SAB de CV dipped in trading after last week's gains.

“An overall lack of conviction will continue to put credits like Cemex through a deep volatility cycle, which could last for quite a while,” he said.

Brazil-based Braskem SA was “the belle of the ball,” another trader said, with its bonds in “somewhat of a holding pattern.”

Chile’s high-grade corporates were also stuck in a rut, he said, but seemed “much less vulnerable to general market weakness and contagion than a few weeks ago.”

Brazil spreads widen

Brazil's five-year credit default swaps spreads drifted wider while cash prices moved a bit lower into the close on Monday, a New York-based trader said.

Brazil's CDS finished at 478 basis points from 475 bps while Mexico's moved to 197 bps from 195 bps.

“Cash prices under a bit of pressure today, as United States Treasuries back up a bit and spreads are wider,” he said. “Argentina continues to make new recent highs, whereas Venezuela is lower on oil weakness.”

Argentina bucks trend

Indeed, Argentina’s Bonar 2024s moved up to 107.65 from 107.30 while Venezuela’s 2027s moved to 36 from 36.75 and PDVSA's 2017s closed at 40.50 from 41.

“Flows light for the session, with balanced inquiries,” the trader said. “Today we did see some correlations break down as oil sold off whereas risk was stable. Is this the start of a new paradigm? Or will recent trend of oil weakness damping sentiment in risk continue?”

DPWorld down, TAQA improves

Looking to the Middle East, some profit-taking was seen on Monday, a London-based trader said.

“Some paper came out at the long end, with DP World and Saudi Electricity Co. trading down,” he said. “Qatar’s 2040 and 2042 were popular for most of the session.”

Long-dated bonds from International Petroleum Investment Co. and Abu Dhabi National Energy Co. (TAQA) saw some support.

In other news from the region, market sources were whispering about Bahrain and whether the sovereign could tap its 2021s and 2026s.

Pakistan, Turkey get attention

Monday also saw some local “nibbling” on bonds from Pakistan after the curve’s recent underperformance, another trader said.

“Turkey banks widened with supply on the way, but no real significant selling to push spreads wider,” he said.

Turk Eximbank prints notes

In its new deal, Turk Eximbank sold $500 million 5 3/8% five-year notes at 99.568 to yield Treasuries plus 411.5 bps, a market source said.

Citigroup, HSBC, ING, Mizuho Securities, MUFG and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

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