EM debt spreads mixed to lower; Kazakhstan notes on tap; Oman 2025 sukuk edges par

By Rebecca Melvin

New York, Oct. 29 – Spreads on emerging markets debt were mixed to lower on Monday after widening out on Friday. The tone was subdued to start the week during which books will close on what has been a tough month for both EM debt and the broader markets.

There were no new deals heard to be announced in the primary market in the Central and Eastern Europe, Middle East and Africa region or Latin America, according to market sources.

But roadshow meetings for the Republic of Kazakhstan’s euro-denominated senior unsecured benchmark offering of 10-year notes began in Europe, with investor response to the planned deal expected to be positive.

“I think it should go pretty well ... the market has been waiting for this one for a while so investors should be ready to engage. It will all come down to pricing and if the issuer is OK to pay a higher new issue premium,” a London-based market source said.

The Kazakhstan Rule 144A and Regulation S deal will be issued subject to market conditions with a dual listing on the London Stock Exchange and Astana International Exchange.

In secondary market action, the new Oman sukuk due 2025, of which $1.5 billion priced on Thursday, was said to be seeing good volume and was quoted at just over par in the context of 100.12 bid, 100.22 offered.

Brazil’s bonds bounced around but ultimately ended around the unchanged mark on Monday after far-right candidate Jair Bolsonaro, 63, defeated ex-Sao Paulo mayor Fernando Haddad, the left-wing People’s Workers party candidate, in a runoff election for president on Sunday.

Polls predicted a victory for Bolsonaro, who received 55.54% of votes to Haddad’s 44.46%. Financial markets favored Bolsonaro, who campaigned on market reforms and privatization, as well as environmentalism. Bolsonaro officially takes office in January.

Initially some investors turned sellers of Petroleo Brasileiro SA bonds early on Monday, but by the end of the session, the bonds were about unchanged.

Petrobras’ 8¾% bonds due 2026 ended the session about unchanged at about 112.25 after trading down in the early going. The reaction was the opposite of what happened earlier this month in the initial runoff vote, when a Bolsonaro victory caused this bond to trade up to about 112, from 109.5 from 109.

Petrobras’ 5.999% notes due 2028 traded at 96.60, which was also little changed after earlier trading lower.

Elsewhere, Colombia-focued Gilex Holding Sarl priced a $45 million add-on to its 8½% notes (B2//B) due 2023. The notes were priced at 101.291. They bring the total deal size to $345 million. Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC were joint bookrunners of the Rule 144A and Regulation S deal.

Gazprom Neft PJSC said its GPN-Finance LLC subsidiary is considering purchasing some of the $1.5 billion 4 3/8% loan participation notes due Sept. 19, 2022 and $1.5 billion 6% loan participation notes due Nov. 27, 2023 issued by GPN Capital SA.

The repurchases will be made in the open market from time to time or in privately negotiated transactions.

Gazprom Neft is a Moscow-based oil producer and part of gas company OJSC Gazprom.

In Asia, India’s Tata Power Co. Ltd. plans to issue up to Rs. 55 billion of noncumulative redeemable debentures in one or more tranches by way of private placement.

The debentures will be listed and rated.

Tata Power is a power utility based in Mumbai.

The whipsaw trading action in U.S. stocks continued on Monday with notable gains in the indexes dashed in late trading leaving stocks with more losses. Emerging markets debt has held in reasonably well amidst the carnage that has been October. Books for October will close on Wednesday not a minute too soon, however. For the year so far, the J.P. Morgan sovereign U.S. dollar bond index is down 5.2% as of Friday. The GBI-EM global bond index of domestic government bonds denominated in local currencies but converted to U.S. dollars is down 8.25%, and the EM debt corporate bond index is down only 0.1%, in terms of total negative return.

The situation in corporate bonds is essentially one of “benign neglect,” said Michael Roche, emerging markets debt strategist for Seaport Global Securities. The market has been helped by the rollover of a lot of Chinese corporate debt.

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