OTP Mortgage prices notes; EM bonds widen on FOMC; roadshows ahead for Cencosud, Baosteel

By Christine Van Dusen

Atlanta, Jan. 29 – Hungary’s OTP Mortgage Bank Ltd. sold notes on Thursday as investors digested the latest statement from the Federal Open Market Committee and as euro-denominated paper saw significant demand ahead of quantitative easing in Europe.

U.S. Treasuries rallied after the FOMC said it expected to see declines in inflation and that the Federal Reserve Bank would be patient in raising rates, a London-based analyst said.

“Most bond spreads are opening wider here in [EM] this morning as a result,” he said.

Russia’s 2030s opened 10 basis points wider while its credit default swaps spreads moved out 5 bps while the European Union considers capital market restrictions and extending some sanctions, he said.

And Turkey’s credit default swaps were 2 bps wider on Thursday.

Meanwhile, investment-grade names from the Middle East remained “solid, especially Abu Dhabi, Qatar and Saudi Electricity Co.,” a trader said. “High-yield names are without much support at all. As such, the likes of Kuwait Energy Co. and Dar al-Arkan Holdings have seen selling pressure.”

Kuwait Energy’s 2016s were 16 points off their high, he said.

“Supply has been almost non-existent” in the Gulf region, he said, other than the recent issue of perpetual notes from Dubai Islamic Bank PJSC.

The 6¾% perpetual notes priced earlier this month at par to yield 6¾%, or mid-swaps plus 512.6 bps, after talk in the 7% area.

“They had a rocky start, being typically poorly placed, and traded from par down to 98.75 and today closed at 99.90 bid, par offered with what feels like plenty of paper near par for sale,” he said.

In deal-related news, Chile’s Cencosud SA and China’s Baosteel Resources International Co. Ltd. set roadshows for upcoming bond issues.

Petrobras in focus

From Latin America, the market determined there were more negatives than positives in the earnings report released by Brazil-based Petroleo Brasiliero SA (Petrobras), a New York-based trader said.

The state-run oil company on Wednesday reported its awaited third-quarter results but didn’t include the costs associated with an ongoing corruption scandal. This pushed Petrobras’ bonds wider by as much as 30 bps before they narrowed slightly into the close, he said.

Selling of short-dated bonds from Petrobras picked up steam, he said, while Brazil-based Vale SA continued to see limited to no support and widened about 15 bps.

Sino-Ocean Land stands out

Looking to Asia, most bonds put in a weak session, with high-grade bonds widening between 2 bps and 5 bps, a London-based trader said.

But China-based Sino-Ocean Land Holdings Ltd.’s new 5.95% notes due in 2027 that priced at 99.737 to yield 6.1%, or Treasuries plus 429.6 bps, was an outperformer.

“Rallied 25 bps to close the day at Treasuries plus 405 bps bid, 395 bps offered,” he said.

The other tranche – 4.45% notes due 2020 that priced at 98.806 to yield 4.721%, or Treasuries plus 340 bps – “leaked at the open to as wide as Treasuries plus 341 bps, then rallied to as tight as Treasuries plus 334 bps during the morning session,” he said.

Philippines falters

Better-than-expected economic numbers from the Philippines created a firm tone for the sovereign’s bonds, a trader said.

The country’s 2040s went from 109.875 bid, 110 offered to 110.25 bid, 110.375 offered on the news, he said.

But weaker U.S. Treasuries prompted profit-taking that moved the bonds lower to close at 109.875 bid, 110.25 offered. Indonesia’s 2045s closed lower too, at 106.25 bid, 106.50 offered.

Deals on the horizon

Some market-watchers on Thursday were talking about Belarus, which could have difficulty repaying its scheduled $4 billion in debt this year and may need to discuss restructuring it.

Sources were also whispering about a possible issue of notes in the United States from China-based investment holding company Tencent Holdings Ltd.

And African nations could soon make a push into renminbi-denominated territory, with Mauritius potentially leading the way, market sources said.

OTP Mortgage sells notes

In its new deal, Budapest-based OTP Mortgage Bank printed €500 million floating-rate notes due Feb. 5, 2017 at par to yield Euribor plus 65 bps, matching talk, a market source said.

BNP Paribas was the bookrunner for the deal.

Cencosud sets roadshow

Chile-based retail company Cencosud will set out on Friday for a roadshow to market a potential issue of Rule 144A and Regulation S notes, a market source said.

HSBC and Scotiabank are arranging the marketing trip, which will begin in Santiago and travel to New York, London, Los Angeles and Lima before concluding on Feb. 4 in New York.

Baosteel plans euro bonds

China’s Baosteel will set out on Feb. 3 for a roadshow to market a euro-denominated offering of notes, a market source said.

Deutsche Bank, HSBC, Agricultural Bank of China, Bank of China, ICBC, JPMorgan and Standard Chartered are the bookrunners for the Regulation S issue.

The Shanghai-based and state-owned iron and steel company earlier this month priced $500 million 3 7/8% five-year notes at 99.488 to yield 3.989% via Commonwealth Bank of Australia and National Australia Bank Ltd. in a Regulation S deal.

Eustream, Ivory Coast on tap

Slovakia’s eustream is looking to issue euro-denominated notes, a market source said.

The Bratislava-based gas transmission company is expected to hold a roadshow for the deal.

And Ivory Coast is expected to issue eurobonds as soon as February, another market source said.

Other details were not immediately available on Thursday.

CAR deal draws orders

The new issue of notes from China’s CAR Inc. – $500 million 6 1/8% notes due 2020 that priced at 98.944 to yield 6 3/8% – drew a final order book of more than $7 billion from 340 accounts, a market source said.

The notes were talked at a yield of 7%.

Credit Suisse and Standard Chartered Bank were the joint global coordinators and, with Deutsche Bank, the joint bookrunners and lead managers for the Rule 144A and Regulation S deal.

About 45% of the orders came from Asia, 35% from the United States and 20% from Europe.

Fund managers picked up 85%, private banks 9%, insurers 4% and others 2%.

In the secondary market on Thursday, the notes didn’t trade much, a London-based trader said. They moved as high as 100.375 before closing at 99.875 bid, 100.25 offered.

Deal from FirstRand

On Wednesday, South Africa’s FirstRand Bank Ltd. priced €100 million 2¼% five-year notes at 99.65, according to a company filing.

Other details were not immediately available on Thursday.

FirstRand is a lender based in Sandton, South Africa.

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