Oman to tap dollar tranches; investors digest FOMC statement; good liquidity in Gulf region

By Christine Van Dusen

Atlanta, Sept. 21 – Oman announced plans to tap two dollar-denominated issues on a Wednesday that had investors awaiting the latest word from the Federal Open Market Committee, which late in the day lowered its expectations for a rate hike but suggested that it could happen before the end of the year.

“It’s the long awaited day in markets, with two major central bank decisions by the Bank of Japan and the Fed,” a London-based analyst said. “The BOJ left the benchmark rate unchanged at – 0.1%.”

Going forward, “the central bank will tweak its monetary policy to enhance flexibility, set a zero interest rate target for 10-year government bonds and vowed to reach inflation above the actual 2% target,” he said.

The markets were pricing in a low probability for a rate hike, he said.

“Investors are still curious about the further trajectory,” he said. “[Emerging markets] credit have certainly benefitted from the trend for lower yields and additional easing in developed markets over the last few months, so any outcome will likely set the tone for the next few days or weeks.”

Against this backdrop, Oman was looking to tap its dollar-denominated notes due 2021 and 2026.

The original $1 billion 3 5/8% five-year notes priced in June at 99.887 to yield mid-swaps plus 245 basis points, following talk in the 262.5 bps area.

The $1.5 billion 4¾% 10-year notes priced at 99.827 to yield mid-swaps plus 320 bps, following talk in the 337.5 bps area.

Oman bonds dip

Citigroup, JPMorgan, MUFG Securities, National Bank of Abu Dhabi and Natixis were the bookrunners for the original Rule 144A and Regulation S deal from Oman.

The proceeds were to be used for general budgetary purposes.

“Omani bonds dropped between 50 cents and 62 cents, but on spread they’re only a couple wider,” a trader said. “Moderately active day.”

Turkey tighter, Asia unchanged

Bonds from Turkey started off about 2 bps to 4 bps tighter overall, a London-based trader said.

“Firm open in risk,” he said.

Looking to Asia, spreads were mostly unchanged to 1 bp tighter, another trader said.

“Seeing some selling in short-end paper by real-money accounts,” he said. “Oil names mainly unchanged.”

Technology-related bonds were between 1 bp and 2 bps tighter, with some buying, he said.

Middle East in focus

Bonds from the Middle East saw some good liquidity on Wednesday, a trader said.

“Interesting market today, with rates backing off towards 1.71%, but fairly good demand for duration assets, especially Qatar’s 2046 and DP World’s 2037 into the close,” he said. “They show good spread-tightening on the day.”

Saudi Electricity Co. traded well in the morning, then faded with rates, he said, while Dubai Electricity and Water Authority’s 2020s saw some support at the 118 price level.

“Looks a tad rich to me, but there is no stopping demand,” he said.

Ukraine ticks down

Looking to Ukraine, sovereign and quasi-sovereign bonds have been ticking lower so far this week, said Svitlana Rusakova of Dragon Capital (Cyprus) Ltd.

“Hard to pinpoint the reason, as EMs generally traded well and local news flow was limited,” she said. “Perhaps the fact that the key positive catalyst – IMF disbursement – is already behind us has played some role.”

Corporates, meanwhile, have been stable, she said.

© 2015 Prospect News.
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