Lithuania, Buenos Aires delay pricing due to market; Oman to sell seven-, 12-year sukuk

By Colin Hanner

Chicago, May 18 – The weakness felt in Wednesday’s emerging markets session continued through Thursday, a market source said.

Citing a dual-tranche euro-denominated trade expected to come “imminently” to market from Lithuania, a market source said that the pricing delay was not reflective of the country’s ability to garner support for its new issues but the market sentiment right now.

“That’s not about Lithuania, that’s about the backdrop being weaker,” the source said. “The market has paused and is softer. It’s waiting for some stability for the rest of the pipeline to come.”

The instability or softness felt in other markets – felt especially on Wednesday in equity markets, which had its worst showing this year – has been attributable to political concerns in the United States that have had aftershocks throughout global markets.

“It’s emanating from risk-off generically,” a market source said. “It has been one-way traffic in a positive direction, and that was interrupted yesterday, but people are trying to work out whether this is a blip or a change in direction.”

Brazil rebounds after shakeup

Controversy surrounding U.S. President Trump’s administration took a backseat to Brazil President Michel Temer on Thursday in Latin American emerging markets.

Brazilian newspaper O Globo reported on Wednesday evening that a surfaced audio recording of Temer, in which he allegedly approves of continuing to pay off a potential witness, may link him to the impeachment of former president Dilma Rousseff. The supposed recording was not released.

Brazilian bonds were shaken on the day, dropping several points across the board.

“At least for Brazil, while you can’t say it is totally unexpected, it is a bombshell,” a market source wrote in an email. “It will have ‘collateral damage’ for other countries but won’t hit others nearly so hard. I would expect no Brazil deals for a while.”

The source added that Buenos Aires, expected to price a near-benchmark deal on Thursday, has “already delayed pricing their deal” because of the report.

Just days after selling a combined $4 billion of add-ons, Petroleo Brasileiro SA (Petrobras) saw sharp losses in the morning, though its bonds rebounded in the afternoon session.

From the morning, its 5¾% notes due 2020 were up ½ point to a 103 bid, 104 offer.

Its 4 3/8% notes due 2024 were up 1 point to a 92½ offer, 93½ bid.

And the 6 7/8% notes due 2040 tightened by 1 point to a 94 bid, 95 offer.

Brazil-based Vale SA’s 5 7/8% notes due 2021 continued to leak into the afternoon and were down 1¼ point to a 106 bid, 107 offer.

On the other hand, its 7/8% notes due 2036 were up 2 points to a 105½ bid, 106.51 offer.

Oman plans dual-tranche sukuk

Oman is expected to offer seven- and 12-year sukuk following an investor call next Monday, a market source said.

On Wednesday, a market source, citing comments made by Oman finance minister Darwish Al Balushi in a media report, said Oman is expected to sell $2 billion of sukuk in the coming weeks.

Last Friday, S&P Global Ratings lowered its long- and short-term ratings on Oman to BB+/B from BBB/A-3, citing the Omani government’s heightened external financing needs.

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