EM wider on weakness, lower liquidity; Turkey firms up slightly; Cameroon, NBO on deck

By Christine Van Dusen

Atlanta, Nov. 12 – Most emerging markets assets moved wider on the day as weakness in risk assets, commodities and currencies pushed prices lower.

Liquidity dwindled too, a London-based trader said.

“Not much change in risk over the last few days, but what is starting to trend is the drop in liquidity,” a trader said. “I still think it makes sense to be light on risk at current levels, given the uncertainty that lies ahead.”

From Turkey, sovereign bonds firmed up slightly as “investors become more neutral on the credit, post-elections,: he said. “Turkey banks are in consolidation mode.”

Corporates, he said, “are gappy, with not much going on.”

Nearly all bonds from Latin America were caught up in Thursday’s weakness, a New York-based trader said.

“Overall liquidity is holding in OK, but all credits are lower, to varying degrees,” he said.

Brazil-based Petroleo Brasileiro SA saw better selling while Vale SA was quiet with mixed flows, he said.

Other Brazilian corporates, like Braskem SA, continued to weaken and banks from Colombia took a hit.

High-grade names from Mexico were difficult to source on Thursday, he said.

Mexico-based Cemex SAB de CV moved lower.

Meanwhile, sovereign debt spreads from Latin America widened on the day, with five-year credit default swaps spreads for Brazil moving to 425 basis points from 410 bps and Mexico’s widening to 156 bps from 150 bps, another trader said.

“Cash prices close lower by 25 cents to 50 cents as spread widening offsets any benefit from U.S. Treasury strength,” he said.

However, high-yield names from Latin America did manage to hold up “surprisingly well,” he said.

Venezuela’s 2027s finished the day at 43.60 from 43.50 while PDVSA’s 2017s closed at 60.10 from 60.75.

Also on Thursday, market sources were whispering about a possible $2 billion issue of bonds from Iraq in the first half of 2016. The sovereign postponed plans in September.

Dubai bank trades

Commercial Bank of Dubai’s new issue of $400 million 4% notes due 2020 that priced Tuesday at par to yield 4%, or mid-swaps plus 232 bps, traded at 99½ bid, 100 1/8 offered.

The notes were initially talked at a spread in the low-to-mid 200-bps area.

Citigroup, ING, JPMorgan and National Bank of Abu Dhabi were the bookrunners for the Regulation S deal.

Cameroon launches notes

Cameroon launched a $750 million issue of notes due in 2025 at a yield of 9¾%, a market source said.

The notes were initially talked at a yield in the 9¾% area.

Societe Generale CIB and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal.

“A natural comparison for this is Gabon,” a trader said. “Gabon 2025s, with no amortizing, are trading bid side at 9.04%.”

Said another trader, “We think the guidance levels look fair versus other comparables with similar economic profiles and yield levels as we incorporate a concession for the debut issuance of 25 bps, but think that the bonds have the potential to trade inside the Angola curve.”

Oman bank sets talk

National Bank of Oman SOAG gave initial guidance in the 7 7/8% area for a $300 million issue of perpetual notes, a market source said.

Citigroup, Credit Agricole, National Bank of Abu Dhabi and Societe Generale CIB are the bookrunners for the deal.

“We think that current yield levels of Middle Eastern issuers and also specifically of National Bank of Oman are unattractive and that NBO needs to offer a concession of around 50 bps, given liquidity concerns and compared to AT1s in the international space,” a trader said.

“We therefore think that NBO could issue at around 7.6%.”

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