Holiday weekend quiets global markets; new Oman notes firm; Dr. Peng prices; PDVSA weaker

By Rebecca Melvin and Colin Hanner

New York, May 26 – With business muted on Friday by various holidays across the globe, primary emerging markets were mostly shuttered, and emerging market credits were narrowly mixed, according to market sources.

A number of new issues had priced in the Middle East early this past week, but the start of the Islamic Ramadan holiday on Friday will see a decrease in new issues from the Middle East during the holiday period, a market source said.

Meanwhile, spreads were firm in the Middle East and even strengthened somewhat as markets digested the implications of extended production cuts by the Organization of Petroleum Exporting Countries through March 2018. Initially, crude oil prices fell on the news Thursday, but those losses were recouped on Friday. However, oil prices still ended the week down about 2%.

In sovereign Middle Eastern markets, Saudi Arabia was unchanged or slightly higher across the board on Friday, with its 2 3/8% notes due 2021 up 7 basis points to 98.92 bid, 99.07 offered. The Saudi 3.628% notes due 2027 were unchanged at 100.70 bid, 101.95 offered. And day over day, Saudi bonds were up more than 10 bps.

Oman’s recent issue, $2 billion of 4.397% seven-year notes, was quoted at 100.09 bid, 100.17 offered, which represented a slight lift from its par issue price on Tuesday.

Meanwhile, new issuance from this region is not expected to be affected by the extension of production cuts, which were initially disappointing for some market observers, who wanted OPEC to do more to support oil prices.

“People weren’t waiting to come to the market with new issues” on the back of OPEC’s decision, and although a slow start is expected next week with the U.S. and U.K. financial markets closed on Monday, the pace of deals being added to the pipeline is expected to resume somewhat quickly.

From Asian markets, Dr. Peng Telecom & Media Group Co., Ltd. priced $500 million 5.05% three-year notes at par on Thursday, a market source said.

Talk on the Regulation S notes (Ba2/BB) tightened to a yield of 5.05% from the 5˝% area, a market source said.

Demand for the deal was more than $2.5 billion, a market source said.

DBS Bank was the bookrunner for the deal.

Proceeds will be used for overseas investments and other general corporate purposes, Moody’s Investors Service said.

In Latin America, credit was mostly flat to weaker, with Venezuela’s Petroleos de Venezuela SA bond series indicated lower by 0.5 point to 0.75 point on average. But economic data out of the United States, including an improved real gross domestic product for the first quarter, appearing to lend support to some credit markets.

U.S. GDP increased at an annual rate of 1.2% in the first quarter, according to the second estimate of the U.S. Commerce Department’s Bureau of Economic Analysis. That was better than the first stab at the number, which was 0.7%, but still less than the 2.1% for the fourth quarter of 2016.

The general picture of economic growth remains unchanged, the Commerce Department said in its release on Friday. Meanwhile, U.S. Treasuries were roughly unchanged on the week, with early Friday gains in government bonds retraced later in the shortened session.

The bond market closed early at 2 p.m. and will remain shut on Monday in observance of Memorial Day.

The release Wednesday of the Federal Reserve’s May 2 to May 3 meeting minutes seemed to put a cap on yields that had been trending higher prior to the release. The yield on the 10-year Treasury on Friday at 2 p.m. ET stood at 2.2465%, which was down 0.0105% on the day.

The relatively firm tone did not extend to PDVSA’s bonds. Its 7% notes due 2018 were indicated Friday at 66˝ bid, 67˝ offered, which was down from 67Ľ bid, 68Ľ offered on Thursday.

PDVSA’s 8˝% bonds due 2017 were indicated at 89 bid, 90 offered on Friday, compared to 89˝ bid, 90˝ offered on Thursday.

But Brazil’s Petroleo Brasileiro SA bonds were up from earlier in the week. The Petrobras 7˝% notes of 2044 were indicated up at 98˝ bid, 99˝ offered on Friday compared to a closing level of 97˝ bid, 98 offered on Monday. That level is still below were the bonds stood at well over par at 102˝ bid, 103 offered before the corruption scandal story surrounding Brazil’s President Michel Temer broke last week.

“Petrobras has been flat to secondaries. It’s been quite tight. People have been through this before. Every time the market has a bid sell off the market bounces back,” a New York-based Latin America specialist said.

“We can’t say who will be president next month. But the new president will attempt to do the right things.” the specialist said.

© 2015 Prospect News.
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