Issuance from Export-Import Bank of China, Shanghai Pudong Development; EM trading mixed

By Christine Van Dusen

Atlanta, Sept. 9 – Export-Import Bank of China and China’s Shanghai Pudong Development Bank Co. Ltd. sold notes on a mixed Wednesday for emerging markets assets.

“Fairly positive opening, with the strength in developed markets carrying over to today,” a London-based trader said. “Asia equities are strong, with some belief in a soft landing, opposed to a hard landing for China.”

From Asia, investment-grade bonds closed the morning session about 3 basis points to 5 bps tighter, a trader said.

“Tone was firm but demand was mixed,” he said. “China oils closed 4 bps to 8 bps tighter, with on-the-run names outperforming.”

Bonds from India closed the early session 3 bps to 5 bps tighter, with better buying seen for corporate notes, he said.

“Speculation builds on further fiscal and monetary support in the pipeline, pushing EM a step forward after taking two back,” another trader said. “All risk indicators are looking fairly bullish, with rates selling off with a steepening bias, equities up and credit indices tighter.”

From the Middle East, spreads tightened on the better tone in broader markets, another trader said.

Bahrain bonds were firm, he said, though the 2044s lagged slightly. And Saudi Electricity Co.’s bonds experienced mixed flow.

“In the past 36 hours, the 2043s started to see better demand,” he said. “It does remain 45 bps wider over the month, however.”

Perpetuals from the Gulf region were mixed, he said, with buyers of Dubai Islamic Bank PJSC.

And Burgan Bank’s 2020s and perpetuals were better offered on Wednesday, he said.

Pressure on Brazil corporates

From Latin America, Brazil-based Petroleo Brasileiro SA faced thin liquidity and remained under pressure after Tuesday’s “abysmal close,” a New York-based trader said.

Brazil’s Centrais Eletricas Brasileiras SA (Eletrobras) saw its bonds struggle too, after an official from one of its subsidiaries was accused of bribery in the Petrobras scandal, he said.

Vale SA and the rest of the high-grade sector from Brazil were a touch firmer but quiet on Wednesday morning.

“The sovereign cannot rally much when the corporates are being decimated,” another trader said.

Things seemed to be getting better for the sovereigns on Wednesday morning, though, with investors taking a risk-on attitude.

But Tuesday started off with the same optimism, “and in the end only Mexico traded well,” he said. “In fact, Mexico was the only credit where we saw decent client activity yesterday. We saw demand in the belly of the curve and finally a few clients checking us on [Pemex].”

Chexim prints two tranches

Export-Import Bank of China – via Avi Funding Co. Ltd. – priced a $1 billion issue of notes due Sept. 16, 2020 and 2025 in a Rule 144A and Regulation S deal, a market source said.

The $500 million 2.85% notes due 2020 priced at 99.898 to yield Treasuries plus 130 bps, following talk of 135 bps.

The $500 million 3.8% notes due 2025 priced at 99.646 to yield Treasuries plus 160 bps, following talk of 165 bps.

Bank of China, Barclays, Bocom HK Branch, HSBC, JPMorgan and MUFG were the joint global coordinators for the Rule 144A and Regulation S deal. ANZ, Bank of China, Barclays, Bocom HK Branch, HSBC, ING, JPMorgan, MUFG and Westpac were joint lead managers and joint bookrunners.

Shanghai bank does deal

China’s Shanghai Pudong Development Bank sold $500 million 2½% notes due Sept. 17, 2018 at 99.756 to yield Treasuries plus 150 bps, a market source said.

The notes were talked at a spread in the 175-bps area.

Agricultural Bank of China (Hong Kong), Citigroup, CCBI, HSBC, SPDB (Hong Kong), ANZ, Bank of Communications Hong Kong, Guotai Junan International and Haitong International were the bookrunners for the Regulation S deal.

The proceeds will be used for working capital and general corporate purposes.

The lender is based in Shanghai.

KDB launches notes

Ten-year notes from Korea moved 5 bps to 7 bps tighter, a trader said, but the upside was capped after Korea Development Bank announced a new 10-year deal.

The lender launched a $750 million issue of notes due in 2025 at Treasuries plus 115 bps.

The notes were initially talked at a spread in the 135-bps area.

BNP Paribas, BofA Merrill Lynch, Credit Agricole CIB, JPMorgan, KDB Asia, Standard Chartered Bank and UBS were the bookrunners for the Securities and Exchange Commission-registered offering.

The proceeds will be used for general operations.

Turkey in focus

Sovereign bonds from Turkey bounced up about 50 cents to 70 cents higher on the long end and 25 cents to 50 cents in the belly of the curve, a trader said.

“No real change in curve shape since yesterday, but generally some flattening had occurred over the past month,” he said.

This came against the backdrop of continuing political issues and fighting between government forces and the PKK, a London-based analyst said.

“The lira has seen a 22% drop versus the U.S. dollar,” he said. “We are also aware that the rating agencies are observing the situation closely.”

The currency could weaken further, he said, which could lead to more selling of corporate and financial bonds, he said.

“Short-duration bank papers with good fundamentals are likely to outperform, and a sell-off provides the opportunity to move to corporates and longer-duration financials and subordinated debt,” he said.

Codelco launches bonds

Chile’s Corporacion Nacional del Cobre de Chile (Codelco) launched $2 billion notes due 2025 at Treasuries plus 250 bps, a market source said.

The notes were talked at a spread in the 275-bps area.

BofA Merrill Lynch, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for general corporate purposes, including capital expenditures and to refinance debt.

Codelco is a Santiago, Chile-based copper mining company.

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