Volatility roils EM; Argentina ups rates; Panama’s Tocumen, Hungary’s Nitrogenmuvek price

By Rebecca Melvin

New York, May 4 – Volatility roiled emerging markets debt on Friday as Argentina’s central bank raised interest rates for the third time in eight days in an effort to support the country’s weakening peso.

The bank raised its benchmark rate to 40% from 33.25%, a day after it raised from 30.25%, and a week after it raised from 27.25%. The peso has lost 6% in the past week and was trading near 22 to the dollar. Turkey’s lira has also fallen sharply in recent sessions.

The peso’s drop is related to investor worries regarding progress on Argentine President Mauricio Marci’s market reform program and also to the strengthening dollar. A stronger dollar makes it more difficult for emerging market borrowers to service their debt, and the dollar strength has sparked selling across the whole asset class.

Fitch Ratings on Friday affirmed Argentina’s long-term foreign-currency issuer default rating at B but revised the outlook to stable from positive, citing “macroeconomic policy frictions and political headwinds that have intensified beyond Fitch’s prior expectations.”

The turmoil kept Latin America’s planned new issues from pricing again and pressured existing paper. The market has seen selling all week.

One trader focused on the Middle East and Africa region said it “was too volatile” to run a typical list of bond prices and spreads on Friday.

There was limited primary market activity however. Panama’s Aeropuerto Internacional de Tocumen SA was the only Latin America issuer this week, pricing $225 million 6% notes due 2048 (expected ratings: /BBB/BBB) at par on Thursday. Pricing came at the tight end of initial price talk in the low 6% area, and Citigroup was bookrunner of the Rule 144A and Regulation S deal.

Veszprem, Hungary-based fertilizer producer Nitrogenmuvek Zrt. priced €200 million of seven-year notes to yield 7% on Friday. The notes, which are non-callable for three years, were initially talked at 7% to 7¼% yield.

Tallinn, Estonia-based Olympic Entertainment Group priced a €200 million issue of 8% five-year senior secured notes (B2/B) at 98.983 to yield 8¼%. The deal, which generated interest among European high yield investors, came at the tight end of the 8% to 8¼% yield talk.

Meanwhile, Petroleos Mexicanos SAB de CV priced CHF 365 million of 1¾% notes due 2023 at par. BNP Paribas and UBS were bookrunners of the Regulation S offering.

But a number of deals for Latin America remained on the calendar for pricing possibly next week or beyond. The deals on pause included Telecom Argentina SA’s dollar-denominated notes and Argentina’s Petroquimica Comodoro Rivadavia SA’s dollar intermediate-term notes. In addition to Argentina deals, Paraguay’s Banco Regional SA’s up to $300 million of up to seven-year notes was pushed out together with its tender for existing notes until May 15, and Peru’s Camposol SA also remains on the calendar with a dollar deal.

In data on Friday, the U.S. monthly jobs report showed a weaker-than-expected 164,000 jobs added in April, but the unemployment rate fell to 3.9%, its lowest level since December 2000. The news initially sent U.S. Treasuries higher, pushing the yield on the benchmark 10-year note down to 2.915%, from 2.946% on Thursday. But Treasuries pulled back from there during the session, with the yield on the 10-year Treasury ending at 2.945%.

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