Morning Commentary: Uruguay prints $1.25 billion bonds due 2031; Mexico offering on tap

By Rebecca Melvin

New York, Jan. 16 – Latin America debt players on Wednesday eyed the Republic of Uruguay’s $1.25 billion of 4 3/8% bonds due 2031, which priced at a tighter-than-expected yield of 175 basis points over U.S. Treasuries.

The pricing was tighter than guidance for a yield of Treasuries plus 185 bps, plus or minus 5 bps. “It was surprising and certainly positive” for the Latin America debt primary market, a New York-based market source said. “It was a very good book, and they used it to tighten below where they thought it was possible.”

Initial price talk for the Uruguay 2031 notes was at Treasuries plus low 200 bps.

Following on the heels of Uruguay’s success, the United Mexican States announced on Wednesday that it is offering U.S. dollar-denominated 10-year global notes to yield Treasuries plus 210 bps area, according to market source.

Barclays, BofA Merrill Lynch and Morgan Stanley are the joint bookrunners for what it expected to be a benchmark-sized deal.

“Mexico is tricky,” the New York-based market source said, adding that it seemed Mexico might not come to market given “a very mixed reaction” to a proposed deal last week.

But in fact, the sovereign didn’t do as badly as the state-owned oil company, Petroleos Mexicanos SAB de CV, the source said. “For the sovereign, it was OK.”

And now Uruguay has set the tone for sovereigns, and it seems like a solid market, the source said.

In the Middle East and Africa region, First Abu Dhabi Bank PJSC’s newly priced $850 million five-year sukuk, or Islamic bond “did OK,” a London-based market source said.

The deal, which is the first for the region for 2019, priced at 99.838 for a profit rate of 3.911% or a yield spread of mid-swaps plus 130 bps.

After first-day trading, the market source closed the notes at 99.95 bid, 100 offered.

Meanwhile, Dubai Islamic Bank PJSC’s offering of Islamic perpetual bonds was in the market. The deal saw an order book of more than $3.6 billion.

© 2015 Prospect News.
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