EM debt starts week flattish amid uncertainty; Oman to price dollar sukuk; Ukraine on tap

By Rebecca Melvin

New York, Oct. 22 – Emerging-markets debt started the week generally flat on low volume with a number of deals expected to price this week and a couple more joining the calendar on Monday, as investors eyed uncertainty on a number of fronts internationally with potential to affect credit.

The yield curve for Oman was a couple of basis points wider, a London-based trader said, after the Gulf Cooperation Council member selected banks and scheduled a fixed-income investor call on Tuesday for a new dollar-denominated seven-year Islamic bond, or sukuk.

Ukraine’s sovereign curve was about 5 bps wider on the day but largely stable, a second source said, after the Eastern European country announced a new mandate and roadshow for a U.S. dollar-denominated benchmark of 10-year notes, as well as a possible long five-year tranche as part of the offering.

Among deals that could price in the coming days are Islamic Development Bank’s euro-denominated benchmark of five-year sukuk, finishing roadshow meetings on Tuesday; Latvia-based used auto-financing concern Mogo Finance SA’s tap of euro-denominated 9½% four-year notes, subject to market conditions; and Tunisia’s euro-denominated five-year note benchmark.

The Latin America region was quiet on Monday after several deals priced last week, but Chile’s Empresa Electrica Cochrane SpA pulled its proposed $725 million of 16-year notes amid a renewed spate of market turbulence.

Deals for Latin America that could still price soon include Peru’s dual-currency tranches of intermediate to long maturities. Peru is planning sol-denominated euroclearable notes and Rule 144A and Regulation S notes. And Brazil’s Investimentos e Participacoes em Infraestrutura SA is planning a dollar-denominated benchmark of intermediate senior notes.

In secondary market action, Turkey’s sovereign bonds were a “little quieter as people are waiting to see what Erdogan has to say tomorrow,” a market source said.

Turkey’s president, Recep Tayyip Erdogan, said that he would meet on Tuesday with parliament to go over details of the murder of Saudi journalist Jamal Khashoggi. Erdogan said that the killing at the Saudi consulate in Istanbul on Oct. 2would be detailed in “full nakedness,” suggesting that he will risk antagonizing the Saudi kingdom and its crown prince, Mohammed bin Salam, to get out what he deems are the facts in the case.

Khashoggi’s status as a U.S. resident and writer for the Washington Post has galvanized U.S. lawmakers to launch their own investigation into the circumstances around Khashoggi’s death, and President Trump has vowed to get to the bottom of it.

The Saudi government initially said that it Khashoggi had left the consulate and that it had no knowledge of what happened to him. Subsequently the government said that the journalist was accidentally strangled in a dispute with Saudi intelligence agents, who were trying to convince Khashoggi to return to Saudi Arabia.

Brazil’s bonds continued to climb as the final runoff vote in Brazil’s presidential election looms into view. Support of far-right candidate Jair Bolsonaro, who has been leading in the polls, does not appear to be diminishing with the vote set for this coming Sunday. Riding a wave of anti-corruption and anti-socialism sentiment, Bolsonaro has campaigned on a very hardline platform, vowing to jail leftwing rivals whom he said have broken laws and designate Brazil’s MST landless workers movement as terrorists.

Emerging markets debt players have been watching developments in the Brazilian election all year. Until recently there was no clear frontrunner in the large field of candidates. The shift toward Bolsonaro has caused investors to buy up Brazil’s international debt.

But Mexico’s credits were lower on Monday, leaving bonds like Petroleos Mexicanos’ 6¾% notes due 2047 off at 91.75 from 92 to 93 on Friday, according to Trace data.

In the broader markets, U.S. Treasuries were in positive territory for much of the session but ended lower after trading in a narrow range. The yield on the 10-year Treasury benchmark was at 3.2% at the end of the trading session in New York.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.