EM debt spreads mostly mixed to tighter; Lebanon’s sovereign curve improves

By Rebecca Melvin

New York, Feb. 13 – Spreads on emerging markets debt were mixed to tighter on Wednesday, with the spreads on Lebanon’s sovereign debt notably tighter as reforms that would help unlock funds for the country came closer to realization, according to market sources.

A proposed policy statement by the government of Lebanon on Tuesday committed to reforms in the areas of electricity, economics, finance and the environment.

Lebanon’s shorter dated 8¼% notes due 2021 were seen 96.99 bid, 97.99 offered with a z-spread that was indicated to be 50.6 basis points tighter on the day, according to a market source.

Lebanon’s shortest-dated note, a 6% bond due 2019, traded at 99.29 bid 100.29 offered, with a z-spread that was tighter by 10.4 bps.

The country’s longest-dated bond, a 7¼% notes due 2037, was tighter by 29 bps and indicated at 80.75 bid, 81.75 offered.

The international sovereign notes of Saudi Arabia and Oman were tighter on the day in terms of spread, but those of Bahrain were wider.

There was also activity in the primary market. Credit Bank of Moscow priced €500 million of 5.15% five-year loan participation notes (expected ratings: BB-/BB-) at a spread of 502.5 basis points over mid-swaps late Tuesday, according to a term sheet.

Pricing of the Rule 144A and Regulation S notes came tighter than the 5¼% guidance and initial price talk of 5¼% to 5½%.

The Republic of Turkey guided pricing for its planned three-year Islamic bond, or sukuk, benchmark to the 5.9% area, according to a market source on Wednesday.

Order books at the time of guidance were for more than $3.5 billion of notes.

Korea Development Bank priced $1 billion of notes (Aa2/AA/AA-) in two tranches.

The $500 million issue of 3% notes due 2022 priced at 99.605, and the $500 million tranche of 3¼% notes due 2024 priced at 99.575.

On the forward calendar, Ronshine China Holdings Ltd.’s new U.S. dollar-denominated three-year notes (expected rating: //B+) are expected to be priced on Friday, according to an announcement.

The Regulation S deal is being priced concurrently with an exchange offer for the company’s $800 million of outstanding 8¼% senior notes due 2021.

No final terms were heard on the Republic of Latvia’s planned benchmark euro-denominated offering of 30-year notes. The notes were talked at a yield of low 70 bps over mid-swaps on Tuesday.

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