Indonesia, Bright Food sell notes; Pemex prices $5 billion; IIF data suggests inflows resuming

By Rebecca Melvin

New York, July 11 – Emerging primary markets saw a number of new deals launch and price on Tuesday, most notably from Asia and Latin America, as global bond markets continued to stabilize following two weeks of selling related to worries global economic growth will spur major central banks to raise interest rates and reduce balance sheets.

The higher yields that resulted from the selloff put pressure on the EM bond universe and led to portfolio debt outflows from the asset class last week, reversing a trend that had been solidly in place since the beginning of the year.

But now with yields holding steady, it appears that outflows have subsided, and since Friday and into this week, data suggests that inflows are resuming, according to the Institute of International Finance, a global trade group of financial institutions.

IIF forecasts that inflows will continue for the rest of the year, albeit at a slower pace in the second half than in the first half.

Among new issues, the Republic of Indonesia priced €1 billion of 2.15% seven-year senior notes on Tuesday at 99.82 for mid-swaps plus 158 basis points yield, according to a syndicate source.

Pricing came tighter than talk for a spread of mid-swaps plus 160 bps to 170 bps, and that was tightened from mid-swaps plus 185 bps area. Order books were in excess of €4 billion, according to an update during marketing.

The Rule 144A and Regulation S notes were sold via joint bookrunners BNP Paribas, Citigroup, Deutsche Bank and Goldman Sachs (Singapore) Pte.

Also in Asia, Shanghai-based food and beverage company Bright Food (Group) Co. Ltd. sold €800 million of three-year notes (expected ratings: Baa3/BBB-/A-) at 99.792 to yield mid-swaps plus 117.5 bps.

Joint bookrunners for the Regulation S deal were BNP Paribas, HSBC, ING, Bank of China, ICBC, Bocom HK Branch, CCB Singapore, Commerzbank, DBS Bank, Rabobank, SG CIB, and Standard Chartered.

China Jinmao Holdings Group Ltd. said it issued RMB 2.5 billion of 4.78% three-year notes on Monday, with proceeds to be used to repay loans of Jinmao’s subsidiaries.

China Jinmao is a Hong Kong-based investment holding company that invests in and develops real estate in mainland China.

In Latin America, Petroleos Mexicanos SAB de CV priced $5 billion of senior notes in two equal tranches, reopening its 6½% notes due 2027 and 6¾% notes due 2047.

The Mexican state-owned oil company priced $2.5 billion of the 2027 notes at 105.487 to yield 5¾% and $2.5 billion of the 2047 notes at 98.094 to yield 6.9%. Both tranches priced with yields that were below the talked yield.

Proceeds of the new notes are being used to buy back near-dated maturities as well as to finance Pemex’s investment program.

BBVA Securities Inc., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC and Santander Investment Securities Inc. are bookrunners for the new paper.

Also in Latin America, Corporacion Andina de Fomento priced $1.25 billion 2.2% three-year notes (Aa3/AA-/AA-) at 99.905 to yield mid-swaps plus 45 bps.

Pricing of the Securities and Exchange Commission-registered notes was also tighter than initial talk. The regional lender’s deal was sold via Barclays Bank plc, BofA Merrill Lynch and Deutsche Bank Securities Inc., and proceeds will be used for general corporate purposes, including funding lending operations.

IIF sees continuing inflows

Looking at a small sample of countries including India and Indonesia with daily portfolio debt flows data, there were $1.2 billion net non-resident portfolio debt outflows for the week ending July 7, according to IIF.

Portfolio debt flows turned negative as central bankers in mature markets turned more hawkish and yields rose, and it was the worst week since the beginning of December, which was during the post-election spike in yields.

However, the partial data compiled through Tuesday, suggests outflows are easing, supported by mature market bond yields holding steady since last week.

The net non-resident portfolio flows to emerging markets debt (including both local and hard currency-denominated debt, as well as corporate and sovereign bonds) are estimated to have been $108 billion for the year to date through June, and for the 2017 full year IFF’s forecast is for $183 billion of inflows.

This implies modestly lower inflows in the second half and is consistent with the expectation that the U.S. Federal Reserve is moving along in the normalization process and the expectations that the ECB will shift gears and follow suit as well.

© 2015 Prospect News.
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