Morning Commentary: EM secondary markets soften; Arab Petroleum, Bank Gospodarstwa Krajowego price

By Rebecca Melvin

New York, Oct. 25 – Emerging secondary markets were slightly soft early Wednesday, as primary markets continued to price new deals, a London-based market source said.

Traders were reacting with the broader markets, including U.S. Treasuries and equities. Turkey’s credit, for example, has seen spread widening in some Turkish banks by as much as 50 basis points, the source said.

New paper was pricing regardless, so there is “a bit of a dislocation between the secondary and the primary,” the market source said.

In the Middle East region, Saudi Arabia’s Arab Petroleum Investments Corp. priced a $500 million Islamic bond, or Sukuk, at par to yield 3.141%, or mid-swaps plus 100 basis points. But the deal priced late in the session with no aftermarket trading action yet seen.

Also new to the market on Wednesday was an issue from Poland’s Bank Gospodarstwa Krajowego, which priced €750 million of 10.5-year notes with a 1 5/8% coupon at 99.821. The Regulation S senior notes are guaranteed by the Republic of Poland, with proceeds earmarked for a national road fund.

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