Eyes on oil, elections; Turkey suffers, Egypt stands out; Atlantida, Tecnoglass prep deals

By Christine Van Dusen

Atlanta, Nov. 4 – Bonds from Turkey widened on negative headlines and Egypt continued to outperform on a Friday that saw the United States release fairly strong hiring and unemployment data for October.

“Net-net, a solid enough number with solid revision,” a London-based trader said.

This was yet another significant moment in what has been an “eventful start of the month across [emerging markets] and global markets,” a London-based analyst said. “The spotlights are certainly on U.S. politics, with the U.S. election now being 4 days away.”

Oil prices also remained in focus, continuing their slide for the third week in a row, he said.

“Doubts on whether OPEC and the key non-OPEC producers will be able to agree on output cuts will likely prevail until month-end, when the bloc meets,” he said.

Recent data seems to suggest that “output has increased further while several OPEC producers have asked to be exempt from any cuts or freezes,” he said.

Meanwhile, negative news from Turkey sent five-year credit default swaps spreads wider by 6 basis points and bonds wider by 10 bps, the analyst said.

On Friday, politicians from the oppositional and pro-Kurdish Peoples’ Democratic Party (HDP) were arrested after having alleged ties to the Kurdistan Worker’s Party (PKK), he said.

“The arrest shouldn’t come as a total surprise, as the parliament already lifted the immunity of many HDP lawmakers in May,” he said. “According to media reports, there has also been a car bomb attack in the Southeastern city of Diyarbakir.”

Turkish banks saw their bonds suffer too, a trader said.

“Banks are wider by 10 bps to 15 bps,” he said.

Turkish spreads widen

The situation for Turkey’s spreads worsened as the day went on, with credit default swaps moving to 275 bps, the wides of the day.

“What surprised most was the volume that was going through $500 million through the screens in CDS, and at least $200 million of long-end cash,” another trader said. “We traded through the whole curve as the volumes and flow gave dealers a chance to clean up some balance sheet.”

If the situation doesn’t escalate over the weekend and sellers emerge, “we could start the long journey of spread recovery,” he said. “Turkey could be the trade for 2017 but I would imagine it’s not going to be plain sailing by any means.”

Egypt continues to outperform

Egypt remained an outperformer on Friday after floating and devaluing the pound, the analyst said.

“The move will likely enable Egypt to secure a three-year, $12-billion International Monetary Fund loan program in within the next few weeks,” he said. “With regard to the planned approach to international debt markets, Central Bank of Egypt governor Amer said that the bonds would be issued after the IMF program is signed.”

In response to this, the sovereign’s 5 7/8% 2025s tightened by about 40 bps, he said.

Saudi Arabia widens

In trading, the new, $17.5-billion megadeal from Saudi Arabia remained active on Friday, a trader said.

“A huge week of flow,” he said. “They close out today wider by 3 bps to 5 bps, with the five-year holding in, again, slightly better.”

The sovereign priced $5.5 billion 2 3/8% notes due in 2021 at 99.007 to yield 2.588%, or Treasuries plus 135 bps. The $5.5 billion 3¼% notes due in 2026 priced at 98.679 to yield 3.407%, or Treasuries plus 165 bps.

And the $6.5 billion 4½% notes due in 2046 priced at 98.015 to yield 4.623%, or Treasuries plus 210 bps.

“Week on week, I have the three of them wider by 8 bps,” he said. “The long one still sees Asian adding.”

Middle East in focus

Elsewhere in the Middle East, bonds from Oman traded fairly well, the trader said, as did those from Bahrain.

“Yes, [Bahrain] has steepened up, with the long end 10 bps to 15 bps wider on the week, but over the month, parts of the curve are 25 bps to 30 bps tighter,” he said. “Qatar National Bank 2021s are very active for the week.”

Perpetuals from the region were mixed, he said, though National Bank of Abu Dhabi did bounce a little bit, to 103.50 before fading a bit.

Low volumes for Ukraine

Bonds from Ukraine went into the end of the week with low volumes, said Svitlana Rusakova of Dragon Capital (Cyprus) Ltd.

“With low liquidity triggering some high-volatile moves,” the curve bounced by about a point, reversing most of Wednesday’s sell-off, she said.

“But with volumes low and U.S. election news flow quite uncertain, expect more volatility,” she said. “Quasi-sovereigns were balanced, gaining a modest ¼ point to ½ point, while corporates outperformed once again.”

Atlantida on roadshow

In deal-related news, Honduras’ Inversiones Atlantida is on a roadshow until Nov. 11 for a dollar-denominated issue of bonds, a market source said.

Oppenheimer is leading the marketing trip, which is being held in the United States and Europe.

Atlantida is a financial group based in Tegucigalpa.

Tecnoglass markets notes

Colombia’s Tecnoglass Inc. is looking to issue up to $225 million bonds due in five, six or seven years, a market source said.

BofA Merrill Lynch and Morgan Stanley are the bookrunners for the deal.

A roadshow will be held until Nov. 9.

Tecnoglass is a Barranquilla, Colombia-based architectural glass transformation company that provides glass, windows and aluminum products for the global residential and commercial construction industries.

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