Asian notes firm; Pacific Rubiales sees light selling; Turkey, Lat-Am tighten; deals ahead

By Christine Van Dusen

Atlanta, July 10 – Many emerging markets bonds were tighter on Friday, ending a week made tumultuous by the continuing crisis in Greece, oil prices, stock market trouble in China and an aborted takeover of Latin America-focused Pacific Rubiales Energy Corp.

“It’s been a week of despair and concern that the market could break under the strain of Greece, China and commodities, then ending on a feeling of ‘get me in’ as we see everything turn positive,” a London-based trader said. “A Greek deal is looking possible, China stocks are bouncing.”

Real-money investors were buyers of Asian bonds on Friday morning after a sell-off in U.S. Treasuries, while fast-money accounts sold into the rally in anticipation of increased demand, a London-based trader said.

Some investment grade names tightened as much as 10 basis points, he said.

“Korea ended the day with mixed spreads, unchanged to 5 bps tighter,” he said. “India saw better buying.”

In other trading, Turkey’s 2026 4¼% dollar bonds were spotted at 96.25, tighter by 8 bps.

Looking to Pacific Rubiales – after the news that Mexico’s Alfa SAB de CV and Harbour Energy Ltd. were withdrawing their takeover bid – strength in trading of its bonds tapered on Friday, with some small selling, a New York-based trader said.

Dealers managed their inventory well, he said, and didn’t flood the market on a low-volume Friday.

Though issuance has been scarce, one trader said he expects supply to pick up next week, ahead of the official summertime doldrums. Some market sources were whispering about possible issues upcoming from Indonesia’s PT Pertamina and Egypt’s Banque Misr.

Lat-Am tightens

Low-beta spreads from Latin America were tighter on the day, as risk appetite continued to improve, a New York-based trader said.

Five-year credit default swaps spreads finished the week at 256 bps from 263 bps, while Mexico’s moved from 132 bps to 127 bps.

Cash prices did weaken as Treasuries sold off, he said, but levels were “relatively stable as spread-tightening cushions may move lower,” he said.

Venezuela on Friday moved off its highs and finished unchanged to lower while Argentina’s bonds moved higher than their recent range.

But volumes remained light, he said, with some buyers for low-beta long end credit later in the day.

Egypt bank in focus

One trader was taking a close look at National Bank of Egypt, which had been expected to issue five-year notes after starting a roadshow on June 24.

“We assume the bank still intends to issue a bond when we reach calmer waters, as the [emerging markets] bond supply has been on hold due to recent market uncertainty,” he said in a report for Schildershoven Finance BV. “From a fundamental perspective, the substantial sovereign risk exposure and the low capital ratios stand out.”

After looking at comparable bank bonds, the trader predicted the new issue would price at a yield in the high-7% area.

© 2015 Prospect News.
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