New Pemex notes mixed; CBQ launches $500 million notes; Venezuela poised ahead of election

By Rebecca Melvin

New York, May 17 – Petroleos Mexicanos SAB de CV’s newly priced notes traded mixed on Thursday after the Mexico City-based oil and gas company priced €3.15 billion of the notes in four tranches during a “stable window” on Wednesday.

The new Pemex 10¾-year notes edged up in trade after €1.25 billion of the notes priced at the tight end of talk. The tranche was one of four that Pemex priced on Wednesday.

The Pemex 4¾% notes due 2029 were quoted at 100.06 bid, 100.20 offered in the early going after they priced at a reoffered 99.434.

Meanwhile the €600 million to €650 million tranches of the 4½-, 5¼- and 7½-year paper traded wider in spread from the break on very little volume driven by broker activity, a New York-based market source said.

But the 2029 notes traded tighter from the break on follow-through appetite by accounts, the source said.

“Pemex caught a stable window of opportunity to access markets and raise €3.15 billion and launch a cash tender offer on the [euro-denominated] 2019s. Pricing landed at about 25 bps to 30 bps wide to fair value, which I think is a very positive pricing outcome,” the source said.

Elsewhere, Commercial Bank of Qatar opened the books and launched an offering of $500 million five-year notes to yield a spread of mid-swaps plus 212.5 basis points.

The Doha-based retail and wholesale banking services provider tightened guidance from initial price thoughts at mid-swaps plus 237.5 bps.

In addition, Qatar National Bank, which is the country’s biggest commercial bank, began pricing a three-year floating-rate Formosa note. Those notes, which will be issued in the Taiwan market but denominated in U.S. dollars under Regulation S, were talked at Libor plus 135 bps.

Emerging markets debt in the secondary market was remained weak with many credits wider on spread basis as U.S. Treasuries weakened again, sending the yield on the benchmark 10-year note up to 3.11% during the session and the dollar higher.

Venezuela, PDVSA retrace gains

In Latin America, Venezuela and Petroleos de Venezuela SA were mostly quiet and wavered at slightly lower prices after a rally of about two points on average from May 8 to 14, ahead of presidential elections slated for the troubled country on Sunday.

Venezuela has spiraled into a severe economic crisis that leaves it close to being a failed state. Hyperinflation has rendered the income of most jobs inadequate for basic needs, and ongoing food and medicine shortages have caused food insecurity and malnutrition to spike. Sadly, Venezuela’s infant and child mortality rates have also soared, with death due to malnutrition a growing specter for a society that is in turmoil.

Opposition candidate Henri Falcon has gained a surprising lead statistically over incumbent president Nicolas Maduro, but some doubt he has the ground game to ensure a fair election, an East Coast-based trader said.

“He needs a lot of participation and I don’t think he can protect his votes” from potential election fraud, the trader said.

Nevertheless, a glimmer of hope for a Falcon victory helped Venezuela and PDVSA bonds to rally last week and into this week. Most bonds rose about 2 points to around the 31 level on the higher-coupon paper.

The Venezuela 2027 bonds went to 31¼ on May 14 from 28¼ on May 8.

The rally occurred with most bonds hovering in the range of 27 to 31 as investors bet on some kind of regime change. By Thursday, however the rally had faded, and most paper was marked around 30.

Market players believe the prospects for debt restructuring are slim to none if Maduro of the ruling socialist party is re-elected. A Maduro victory will almost certainly ensure a continuation of failed policies, U.S. sanctions and reduced oil production.

Even with a Falcon win, it is uncertain whether Maduro will relinquish control of the government. But such a surprise is likely to lift bonds, at least for the short term

© 2015 Prospect News.
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