Romania sells notes; Lat-Am spreads wider on weaker economic data; QIB trades near reoffer

By Christine Van Dusen

Atlanta, Oct. 21 – Romania priced new notes as sovereign spreads for Brazil widened on Wednesday morning, following reports of a worsening deficit and growing inflation, as well as a weaker growth outlook.

“Today the market is dealing with the latest impeachment attempt by Congress of President Rousseff, which seems to be more serious than the previous ones,” a trader said. “As it is, the country’s political life is nearly paralyzed and is severely hampering the government’s ability to react to a rapidly worsening economic crisis.”

Liquidity, he said, is unlikely to improve.

As the morning went on, Brazilian bonds traded better, despite the currency’s sell-off, another trader said.

“We have seen buyers of the 2021s and the long end, mostly the 2045s,” he said. “Not surprisingly, these are the best performers on the day. Still wildly diverging performances inside the curve. We have also seen small demand for 2023s, 2025s and 2041s.”

Brazil-based Odebrecht SA was also in the news on Wednesday, after a federal judge ordered preventive detention for chief executive officer Marcelo Odebrecht and five other defendants as a result of their alleged connection to a Petroleo Brasileiro SA’s bribery scandal.

“We expect some moderate negative reaction to the company’s bonds as a result of this announcement,” according to a report from Schildershoven Finance BV. “We consider investing in the company as risky, due to high level of uncertainty.”

Other corporate bonds from Latin America saw very little selling on Wednesday, another trader said.

Vale widens

Brazil-based Vale SA’s bonds moved about 5 basis points wider after gradually tightening late last week.

“Other Brazil high-grade credits look to be holding in OK,” he said. “Not feeling much effect from the precipitous drop in sovereign dollar assets. The rest of the market still feels firm and is once again quiet.”

High-grade notes from Chile, meanwhile, were “super-firm,” he said, and were once again “back to the point where most of the non-go-go and more-liquid credits are difficult to source.”

Uruguay quiet, Panama weaker

In other trading from Latin America, bonds from Uruguay were quiet and mostly unchanged at the open on Wednesday, with some sellers seen for the 2050s, another trader said.

Panama’s notes opened a “touch weaker,” despite some strength in U.S. Treasuries, he said.

And paper from Peru started the session mostly unchanged.

New Qatar bank bonds trade

The new issue of notes from Qatar Islamic Bank SAQ – $750 million 2.754% Islamic bonds due 2020 that priced Tuesday at par to yield mid-swaps plus 135 bps – opened on Wednesday at par bid, 100¼ offered, a trader said.

Barwa Bank, Citigroup, HSBC, Noor Bank, QInvest and Standard Chartered were the bookrunners for the Regulation S deal.

Qatar Islamic Bank is a financial services company based in Doha, Qatar.

Ukraine bonds see demand

Sovereign bonds from Ukraine saw some demand at mid-week after separatists started to pull weapons back from the contact line, an effort that should conclude on Nov. 10, a market source said.

The demand led to higher levels but “very few bonds actually changed hands,” said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

Also on Wednesday, market sources were whispering about a possible issue of euro-denominated notes from Macedonia and a three- to five-year issue of notes from Russia’s OJSC Alfa Bank.

Romania prices notes

In its new deal, Romania priced €2 billion notes due in Oct. 29 of 2025 and 2035 in a Rule 144A and Regulation S transaction, a market source said.

The €1.25 billion 2 ¾% notes due in 2025 priced at 99.183 to yield 2.845%, or mid-swaps plus 190 bps after talk in the 200-bps area.

The €750 million 3 7/8% notes due in 2035 priced at 99.248 to yield 3.93%, or mid-swaps plus 245 bps after talk in the 250-bps area.

Citigroup, HSBC, RBI and Unicredit were the bookrunners for the Rule 144A and Regulation S deal.

Dongfeng deal attracts orders

The final book for China-based Dongfeng Motor Group Co. Ltd. new €500 million issue of 1.6% notes due 2018 that priced Tuesday at 99.945 to yield 1.619%, or mid-swaps plus 150 bps, was more than €1.5 billion, a market source said.

Bank of China, BNP Paribas, Deutsche Bank, HSBC, Societe Generale CIB, Bocom, CCB International, ICBC (Asia) and Shanghai Pudong Development Bank were the bookrunners for the Regulation S deal.

The proceeds will be used for offshore refinancing of the issuer’s €830 million bridge loan.

The automobile manufacturer is based in Wuhan, China.

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