China Minsheng sets talk; EM activity slows; Asian bonds stay firm; Petrobras, Vale tighten

By Christine Van Dusen

Atlanta, May 14 – China Minsheng Banking Corp. Ltd. set talk for an upcoming issue of notes on a slower Thursday for emerging markets assets, many of which have proved to be fairly resilient in the face of volatile U.S. Treasury rates.

“It’s Ascension Day, so we’re expecting reduced activity today,” a London-based trader said. “Despite the daily ‘wag’ of U.S. Treasuries, EM debt has proven bulletproof for now. The technicals are strong. Supply versus demand – limited new supply versus inflows and bond maturities. I’m sure if the market was liquid we would be tracking the ebb and flow of U.S. Treasuries, but it’s not, so it becomes a buy-the-dip scenario.”

Asian high-grade bonds were unchanged to 3 basis points tighter on Thursday morning, another trader said.

“Positive comments out of Greece sent S&P futures higher and led to a small lift-a-thon in the China low-beta space,” he said.

China-based Huawei Technologies Co. Ltd.’s 4 1/8% notes due 2025 that priced at 99.060 to yield Treasuries plus 195 bps traded up at 177 bps and then to a tight of 173 bps before closing at 173 bps bid, 170 bps offered, 6 bps tighter on Thursday.

China General Nuclear Power Corp.’s new 4¼% notes due 2025 that priced at a spread of 177.5 bps also rallied, moving to 168 bps before closing Thursday at 170 bps bid, 167 bps offered, 8 bps tighter.

From Latin America, Toronto-based and Colombia-focused Pacific Rubiales Energy Corp. was once again receiving attention, this time because the company released slightly weaker-than-expected earnings results.

Pacific Rubiales in focus

This followed the news that a Spanish billionaire had joined a group of Venezuelan investors that oppose the size of the takeover bid from Mexico-based Alfa SAB and Harbour Energy Ltd.

“With so much in flux, we struggle to find how much this information is helpful to forward-looking investors,” a trader said. “Production is up, but revenues and netbacks were down significantly and below market expectations. But with the Alfa-Harbour bid on the table, this could be a drastically different company by the second half of this year.”

In response, Pacific Rubiales’ bonds traded thinly on Thursday, another trader said.

Lat-Am firms

Other Latin American bonds firmed up somewhat on Thursday, a New York-based trader said, trading “on their own merit” and not at the mercy of U.S. Treasuries.

Bonds from Brazil-based Petroleo Brasileiro SA and Vale SA were tighter while Odebrecht SA saw a good jump, he said.

High-grade names from Mexico were also firmer, he said, and sourcing paper was a challenge.

But Cemex SAB de CV was quiet and range-bound, he said.

At the end of the session, low-beta names were unchanged to slightly lower, while credit default swaps tightened a touch, another trader said

Minsheng sets talk

For its upcoming deal, Beijing’s China Minsheng Banking set talk for a dollar-denominated issue of notes due in three years at Treasuries plus 145 bps, a market source said.

UBS, Citigroup, HSBC and CMBC Hong Kong are the joint global coordinators and – along with Barclays, China Construction Bank, Agricultural Bank of China, Bocom Hong Kong Branch, Deutsche Bank and Jefferies – the bookrunners for the deal.

Azmeco plans notes

Azerbaijan Methanol Co. LLC (Azmeco) is looking to raise $1 billion of bonds, according to a company announcement.

The notes will be issued through a private placement in London, led by Highgrove Securities LLP, “but might be traded publicly at London Stock Exchange in the future,” the company said.

The proceeds will be used to support the methanol producer’s continuing growth and to reduce an outstanding loan from the International Bank of Azerbaijan, a market source said.

Other details were not immediately available on Thursday.

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