Oil prices put pressure on EM; ‘minimal progress’ on Ukraine peace deal; Slovakia sells notes

By Christine Van Dusen

Atlanta, Jan. 13 – As oil prices on Tuesday fell to a 5½-year low before ticking back up a touch, many emerging markets bonds weakened, including those from Brazil-based Odebrecht SA.

The company was facing a ratings downgrade from Moody’s Investors Service, following Standard & Poor’s lead, and that sent Odebrecht’s curve down another 3 points on Tuesday, a New York-based trader said.

Brazil-based Petroleo Brasileiro saw its bonds move 5 basis points wider while steel firm Companhia Siderurgica Nacional received little support, with its 2020s moving down another point to 90¾, he said.

Brazilian telecommunications company Oi SA also took a beating, moving down another few points after the postponement of a shareholder decision about whether to sell to France-based Altice.

From Mexico, Cemex SAB de CV moved lower and was quiet in trading, he said. And Unifin Financiera SAPI de CV struggled and saw no buyers, moving down another few points.

Looking to Russia, bonds opened weaker, with the 2030s down 1 point, a London-based analyst said.

“Yesterday saw minimal progress toward a more concrete peace deal in Ukraine,” he said, noting that local media reported the rebels in the country could end the already weak truce. “Talks between the foreign ministers of Russia, Ukraine, France and Germany ended inconclusively.”

So the situation remains tense, he said, which hurt sentiment and dinged bonds from names like Kazakhstan, which saw its bonds move 25 bps wider on Tuesday.

“Elsewhere, however, we are seeing good demand in our markets, especially Central and emerging Europe,” he said. “But the Treasury move means we are generally wider in spread terms.”

Against this backdrop, Slovakia printed a €1.5 billion issue of notes due in 2027 at a yield of 1.442%, or mid-swaps plus 56 bps, a market source said.

KBC Groep and Erste Group were the bookrunners for the deal.

Qatar, Bahrain in focus

In trading from the Middle East, bonds from Qatar remained popular ahead of the maturity of its 2015 bond next week, the analyst said.

The curve for Bahrain continued to steepen, he said, with the 2044s lower by about 10 points from November highs. But not all of the sovereign’s bonds followed that trend; the 2022s and 2023s saw support.

“Middle Eastern and North African credits generally are trying to keep up with the Treasury move, but we are still a little wider, in spread terms,” he said.

Kexim prints two tranches

The primary market hosted Korea Export-Import Bank’s (Kexim) two-tranche issue of $2.25 billion notes due 2020 and 2025, a market source said.

The $1 billion 2¼% notes due in 2020 priced at 99.821. Other pricing details were not immediately available on Tuesday morning.

The $1.25 billion 2 7/8% notes due 2025 priced at 99.483 to yield 2.935%, or Treasuries plus 120 bps.

On Tuesday the notes traded at 111 bid, 109 offered, a trader said.

BofA Merrill Lynch, Barclays, Citigroup, Deutsche Bank, HSBC, JPMorgan and RBS were the bookrunners for the Securities and Exchange Commission-registered deal.

Talk from Dubai Islamic Bank

Dubai Islamic Bank PJSC set talk in the 7% area for its upcoming issue of dollar-denominated and benchmark-sized perpetual Islamic notes, a market source said.

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 sukuk.

A roadshow began in Hong Kong and traveled to Singapore and the United Arab Emirates before concluding on Jan. 12 in London.

The notes are expected to price on Wednesday, a syndicate source said.

“We see fair value at 6.7% to 6.9%, so assuming further tightening in the talk, we think upside will be limited,” the analyst said.

Tunisia seeks issuance

Tunisia is looking to issue $750 million of bonds in January, a market source said.

No other details were immediately available on Tuesday.

Mexico sells bonds

Late on Thursday, Mexico priced a two-tranche issue of $4 billion notes due in 2025 and 2046, according to an announcement from the sovereign.

The $1 billion tap of Mexico’s 3.6% notes due in 2025 priced at a yield of 3.56%, or Treasuries plus 165 bps, after talk of a 175 bps spread.

The $2 billion 4.6% notes due Jan. 1, 2046 priced at 99.984 to yield 4.601%, or Treasuries plus 210 bps. Talk was set at 225 bps.

About $2 billion of the proceeds will be used to fund the purchase of outstanding debt in a concurrent tender offer.

BofA Merrill Lynch, Credit Suisse and Morgan Stanley were the bookrunners for the deal.

China Construction does deal

Also on Thursday, China Construction Bank (Asia) Corp. Ltd. – through SPV State Elite Global Ltd. – sold $700 million 3 1/8% notes due Jan. 20, 2020 at 99.775, a market source said.

Agricultural Bank of China, BofA Merrill Lynch, Bank of Communications, CCB International, GF Securities, HSBC, Huatai Securities, KDB and Wing Lung Bank were the bookrunners for the deal.

Other details were not immediately available on Tuesday morning.

“Quiet, in terms of trading, with bonds wrapped around re-offer,” a trader said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.