Morning Commentary: Call for border wall grabs market’s attention; Asia closed; Turkey eyed

By Christine Van Dusen

Atlanta, Jan. 27 – President Donald Trump’s plan to build a wall at the U.S. border with Mexico put the sovereign’s bonds in the spotlight on a Friday that showed initially mixed trading. Asian markets were closed for the Lunar New Year.

“There’s certainly a lot going on in other places,” a London-based analyst said. “Following Trump’s executive order to construct the U.S.-Mexican border wall, things have arguably turned more hostile.”

The suggestion that the U.S. help pay for the wall by imposing a 20% tax on Mexican imports put pressure on the sovereign’s bonds.

Investors were also paying attention to Turkey, which was set to get an update from Fitch Ratings after the market close.

“Fitch remains the only rating agency to rate Turkey in investment-grade territory but has initiated a negative outlook,” the analyst said. “We consider a downgrade as more likely than not, but see a chance that Fitch might give Turkey the benefit of a doubt and revisit the rating on July 21, given the limited time since initiation of the outlook.”

Market reaction to a downgrade is likely to be benign, given that spreads already incorporate that change and there’s been a lack of forced selling against a still-solid market backdrop, he said.

“An affirmation could provide a positive catalyst in the near term,” he said.

In other news, the new issue of notes from India’s NTPC Ltd. – €500 million 2¾% notes due 2027 – drew a final order book of €2.2 billion, a market source said.

The notes came to the market this week at 99.449 to yield 2.815%, or mid-swaps plus 200 basis points, via Axis Bank, Barclays, Citigroup, MUFG, SBI Capital Markets and Standard Chartered Bank in a Regulation S deal.

About 26% of the orders went to Germany and Austria, 27% to Asia, 12% to Italy, 10% to Switzerland, 10% to France, 9% to the United Kingdom and 6% to others.

Asset managers picked up 71%, insurance 6%, official institutions and central banks 17% and banks and private banks 6%.

© 2015 Prospect News.
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