EM bonds grapple with ‘maddening volatility’; Lat-Am spreads widen; Oman, Russia eye deals

By Christine Van Dusen

Atlanta, Feb. 9 – Spreads for Latin American bonds moved wider – as Asia remained on holiday and oil prices remained low – then staged a small recovery amid “sluggish” trading on a Tuesday that was full of “maddening volatility.”

“It was more maddening volatility on Tuesday, as a midday equity rally helped turn some of the Latin American market positive, though overall benchmarks were mixed on thin holiday volume,” he said.

Five-year credit default swaps spreads for Brazil finished Tuesday at 486 basis points from 484 bps, while Mexico’s moved to 219 bps from 213 bps.

“Cash prices end about 10 cents to 30 cents lower on the day, with the back end outperforming on United States Treasury long-end strength,” another trader said. “Latin American high yield moves lower on the day, with both Venezuela and Argentina lower.”

Indeed, Venezuela’s 2027s were down to 37 from 38, PDVSA’s 2017s closed at 42 from 42.25 and Argentina’s Bonar 2024s traded at 107.50 from 108.30.

“Flows on the lighter side, with mostly two-way inquiries from what we saw,” he said. “Tomorrow we get [Federal Reserve Chair Janet Yellen] testimony, which should be interesting as the Fed walks a fine line and coddles jittery global markets.”

Colombia was an underperformer on the day, with its cash curve down between ¼ point and ½ point, a trader said.

“After underperforming yesterday, [Brazil-based Vale SA] was mostly unchanged, making it among the strongest performing tickers in the asset class,” he said. “[Petroleo Brasileiro SA] was down one point.”

Cemex sees some support

One name that received some Street support on Tuesday was Mexico’s Cemex SAB de CV, another trader said.

“And that support left a lot to be desired,” he said. “Cemex continues to see slightly better sellers, but the more liquid bonds in the credit are quite tradable and there is some money to be made. Just need to stay nimble on it.”

Bonds from Peru were a bit weaker, with prices off about 10 cents to 25 cents across the curve, another trader said.

Ukraine takes a hit

Looking to Ukraine, bonds so far this week have taken a hit from global risk sentiment and continued political uncertainty inside the country, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Not many people were willing to step in, leading to 2½- to 3-point declines and 70-bps widening across most of the curve,” he said. “The next political milestone is the Cabinet’s report to parliament on or after Feb. 16 – one might expect uncertainty to continue until that date.”

Oman to print bonds

Oman is looking to issue between $5 billion and $10 billion of bonds, a market source said.

The proceeds will be used to finance the budget deficit.

Market sources were also whispering about possible dollar issues from Egypt and Uruguay.

Russia looks for bookrunners

Russia is seeking bookrunners for an issue of up to $3 billion of bonds that should come to the market this year, a market source said.

The sovereign has sent requests for proposals to 23 banks.

Other details were not immediately available on Tuesday.

Kuveyt Turk sells notes

Turkey’s Kuveyt Turk Katilim Bankasi AS on Monday sold $350 million 7.9% notes due Feb. 15, 2026 at par to yield 7.9%, a market source said.

Initial talk for the deal was set in the 8% area.

KFH Capital, Dubai Islamic Bank, HSBC, Noor Bank, QInvest, Emirates NBD, Kamco and QInvest were the bookrunners for the Regulation S deal.

That yield was “fair,” a London-based trader said, “given the risk-off tone in the market.”

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