Bahrain sells $2 billion sukuk; rates, oil prices stabilize; Turkey outperforms; OFCB on deck

By Christine Van Dusen

Atlanta, Oct. 4 – Bahrain moved forward with a $2 billion two-tranche deal on Tuesday amid upbeat manufacturing and payrolls data from the United States.

“We had a fairly calm start into the new quarter in terms of secondary market activity, but today’s primary market activity – the Bahrain dual-tranche – will likely push things going,” a London-based analyst said. “Led by Asia and with stabilizing rates and oil prices, we see a modestly positive start into the day.”

The cooling of relations between the United States and Russia is unlikely to “massively impact” the tone at this point, he said.

Russia announced that it would “suspend a nuclear pact in place since 2000 while the U.S. stepped back from discussions on a Syria peace deal,” he said. “Russia’s symbolic move signals a reversal on the trend in a reduction of the nuclear arsenal following the Cold War, although practical implications are likely to be limited for now. Going to Syria, a peaceful solution of the conflict appears to have become impossible in any foreseeable time.”

Turkey also received some attention on Tuesday, as parliament voted to extend the state of emergency for another three months. “Amid such a state, the purging is ongoing and today’s headlines saw the suspension of almost 13,000 police officers,” the analyst said.

Against this backdrop, 10-year bonds from Turkey outperformed on real-money buying, a trader said.

“Last week, no buyers. This week, no sellers,” he said. “Active morning, about 3 basis points to 5 bps tighter.”

By the end of the day, Turkish bonds were 10 bps tighter, another trader said.

Middle East sees interest

From the Middle East, some good interest was shown for bonds and spread performed again on the back of rates moves, a London-based trader said.

Oman was trading well and the Qatar curve was holding, with some investors adding on the long end.

Perpetuals were a “mixed bag,” he said, with buyers of conventional perpetual bonds and sellers of Islamic perpetuals.

Bahrain launches bonds

Bahrain launched a two-part issue of $2 billion notes due in seven and 12 years, a market source said.

The $1 billion Islamic bonds due in seven years launched at 5 5/8%, following talk in the 6% area. The $1 billion 12-years launched at 7%, following talk in the 7¼% area.

“Expecting [pricing terms] in the early [morning],” a trader said.

Bank ABC, BNP Paribas, Credit Suisse, JPMorgan and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal.

“This compares very favorably to the current secondary curve,” the analyst said on Tuesday morning. “Secondary market levels are somewhat bearing the brunt.”

Indeed, the sovereign’s 6 1/8% 2023s and 7% 2026s were wider.

“Among the GCC sovereigns, Bahrain is perceived as more prone to the low oil price environment and also to political unrest, which explains the substantial premiums and lower rating versus its peers,” he said.

OFCB seeks issuance

In other news, Russia’s OFCB Capital plc is looking to issue dollar-denominated loan participation notes, according to an announcement from the company.

Societe Generale is leading the transaction.

Other details were not immediately available on Tuesday.

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