Philippines prints bonds; oil prices, Greece put pressure on EM notes; roadshows ahead

By Christine Van Dusen

Atlanta, Jan. 6 – The Philippines sold notes while investors avoided risk on Tuesday – and Asian bonds moved as much as 10 basis points wider in trading – as oil prices fell and new concerns about Greece arose.

“With the 10-year United States Treasury going sub-2%, outright sellers emerged, pressuring spreads to move wider,” a London-based trader said. “The China oil and gas complex underperformed, with spreads 8 bps to 15 bps wider.”

On the list of underperformers were China Petrochemical & Chemical Corp.’s (Sinopec Group) 2024s and China National Offshore Oil Corp.’s 2023s and 2024s.

“High-grade property moved 5 bps to 15 bps wider,” he said.

In other news from Asia, Malaysia’s 1Malaysia Development Bhd. made headlines after failing for a second time to pay a loan that was due in December.

“Sent bonds in a downward spiral,” the trader said. “Away from that, the India and Korea space, in general, was 3 bps to 5 bps wider.”

And sovereign bonds from Indonesia finished Tuesday’s session a ½ point lower, he said.

Looking to Russia, bonds were under pressure again, as oil prices dropped, a London-based analyst said.

Credit default swaps spreads moved out 40 bps on Tuesday morning while the sovereign’s 2030s traded 30 bps wider, he said.

“Ten-year oil and gas names are generally being marked 35 bps to 40 bps wider,” he said. “Kazakhstan is also being badly hit by oil weakness this morning, moving 25 bps to 30 bps wider in sovereign cash.”

In deal-related news, China’s CAR Inc. and China Huarong Asset Management Co. Ltd. set out on roadshows and State Grid International Development Ltd. planned a marketing trip.

Market sources also were whispering about a possible issue of dollar-denominated notes from Korea Export Import Bank.

Turkey CDS flat

From Turkey, credit default swaps spreads were flat on Tuesday morning, he said. Sovereign bonds were about 9 bps wider, driven partly by the move in rates.

“The Treasury move means we are wider overall in Middle Eastern credits,” the analyst said. “Central and emerging Europe are very quiet, but wider on the Treasury move as well.”

Dubai in focus

Taking a closer look at the Middle East, bonds from Dubai saw two-way action in trading on Tuesday, a London-based trader said.

“There was plenty of activity,” he said. “Flow-wise today, it was very busy, with all sorts of activity and interest.”

Perpetual bonds moved lower on the news that Dubai Islamic Bank PJSC will set out on Thursday for a roadshow to market a dollar-denominated and benchmark-sized issue of Islamic notes.

HSBC and Standard Chartered Bank are the joint structuring banks, and Al Hilal Bank, Dubai Islamic Bank, Emirates NBD Capital, HSBC, National Bank of Abu Dhabi, Noor Bank, Sharjah Islamic Bank and Standard Chartered Bank are the joint lead managers for the Regulation S deal.

The roadshow will begin in Hong Kong and travel to Singapore and the United Arab Emirates before concluding on Jan. 12 in London.

Kaisa underperforms

In other trading from Asia, property companies closed 2 points to 3 points lower, with Kaisa Group a particular underperformer. The company’s bonds closed 12 points to 15 points lower, a trader said.

This followed a downgrade from Moody’s Investors Service, which knocked Kaisa’s corporate family and senior unsecured debt ratings from B3 to Caa3. And Standard & Poor’s lowered its long-term corporate credit rating from BB- to Selective Default.

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.

Lat-Am reacts to Treasuries

High-grade companies from Mexico and Chile saw spreads widen on Tuesday morning as a result of the Treasury move, a New York-based trader said.

Mexico’s Cemex SAB de CV, in particular, was hit in the Street and marked as “an easy sell,” he said.

Brazilian corporates, meanwhile, suffered, with prices dropping and spreads widening for names like Petroleo Brasileiro SA and Odebrecht SA, he said.

Other oil-related names got pummeled too, he said, while banks from Colombia moved wider by as much as 25 bps on no selling.

Sovereigns tighten

Later in the session, low-beta sovereign names from Latin America managed to tighten their spreads, another New York-based trader said.

Both Brazil’s and Mexico’s five-year bonds moved in about 6 bps, he said.

Bonds from Venezuela and PDVSA continued to suffer as oil prices dipped, he said.

Philippines issues notes

The Philippines priced its new issue of $2 billion 3.95% notes due Jan. 20, 2040 at par to yield 3.95%, or Treasuries plus 142.3 bps, according to a filing from the sovereign.

The notes were talked at a yield in the 4% area.

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.

“Looks attractive, in our view,” a trader said.

CAR on roadshow

China’s CAR commenced on Tuesday a roadshow for a dollar-denominated issue of notes, a market source said.

Credit Suisse and Standard Chartered Bank are the joint global coordinators and, with Deutsche Bank, the joint bookrunners and lead managers for the Rule 144A and Regulation S deal.

The issuer is a rental car company based in Chaoyang, China.

Asset manager markets notes

China Huarong Asset Management set out on Tuesday for a roadshow to market an issue of dollar-denominated notes, a market source said.

Credit Suisse, Standard Chartered Bank and Wing Lung Bank are the joint global coordinators. ABC International, BOC International, Bocom International, CCB International, China Merchants Securities, Citigroup, Credit Suisse, DBS Bank, Deutsche Bank, HSBC, ICBC, Jefferies, Morgan Stanley, Standard Chartered Bank and Wing Lung Bank are the joint bookrunners and joint lead managers for the Regulation S deal.

The company is a state-owned asset manager, based in Beijing

Roadshow for State Grid

State Grid International Development will depart Jan. 12 for a roadshow to market a euro-denominated issue of notes, a market source said.

Deutsche Bank, HSBC and Morgan Stanley are the joint global coordinators. Deutsche Bank, HSBC, Morgan Stanley, ANZ, Bank of China, Barclays and RBS are the joint bookrunners and joint lead managers for the deal.

The notes will be issued by wholly-owned subsidiary State Grid Europe Development (2014) Public Ltd. Co.

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