Qatar brings huge deal; Lat-Am bonds move up; Russia, Buenos Aires trade slightly higher

By Christine Van Dusen

Atlanta, May 25 – Qatar priced a giant $9 billion issue of notes on a Wednesday that saw emerging markets assets continue to improve after Tuesday’s showing.

“Today there is more clear follow-through for higher levels, and more participation among the credits, as the global backdrop adds more wind at our backs after fairly strong performance yesterday as well,” a New York-based trader said.

Corporates from Brazil drifted higher on Wednesday morning, led by names like Gerdau SA and Vale SA, he said.

“Colombia banks and corporates are barely participating, held back mostly by technicals, even as oil continues to show promise for a move higher,” he said. “Mexico banks continue to range-trade, based on flows and liquidity.”

By the end of the session, the tone was positive for Latin American credits, as bonds moved tighter and cash prices moved higher, another trader said.

Brazil’s five-year credit default swaps spreads closed at 351 basis points from 356 bps, while Mexico’s were mostly unchanged at 177 bps.

“Cash prices are well-bid all day and did not weaken when the long end of U.S. Treasuries turned south,” he said. “Lat-Am high-yield finishes mixed on the day.”

Argentina’s 2024s closed at 110.125 from 109.875, while the 2026s moved to 104.125 from 103.65, he said.

“Venezuela sees a small reversal of recent front-end strength, with PDVSA 2017s closing down at 68 from 69.50,” he said. “Venezuela 2027s are up a bit, at 43.25 from 43. Flows light on the day with two-way inquiries.”

Russia in focus

The market worked on digesting the Tuesday issue of $1.75 billion 4¾% notes due 2026 from Russia, which priced at par to yield mid-swaps plus 303 bps after talk of 4.65% to 4.9%.

VTB Capital was the sole bookrunner for the Rule 144A and Regulation S deal.

The sovereign says the proceeds will not go to any sanctioned entities.

On Wednesday the notes – Russia’s first not denominated in rubles since 2013 – were seen trading at 100½ bid, 101¼ offered.

“In our view this does not mark the beginning of a larger dollar-denominated issuance program,” according to a report from Commerzbank. “On the contrary, the large current account surplus illustrates that further issuance is likely to be ruble-denominated and can be entirely self-funded.”

Risk premium at risk

While most market-watchers were focusing on concerns about how the Russia deal would trade, given the Ukraine-related sanctions, “the main point is that the issue reflects a collapse in Russian risk premia,” the Commerzbank report said. “It illustrates that sanctions, and financial sanctions in particular, are basically ineffective.”

With this bond issue, “we have a situation where, despite the rolling over of sanctions against Russia, investors do not demand a premium,” the report said. “The market provides little additional risk premium for investors.”

Buenos Aires ticks up

In other trading, Buenos Aires’ new $890 million 7½% notes due June 1, 2027 that priced Tuesday at 99.138 to yield 7 5/8% were spotted Wednesday at about par, a trader said.

BofA Merrill Lynch, Deutsche Bank and HSBC were the bookrunners for the deal.

Turkey holds gains

Bonds from Turkey held on to the previous day’s gains, “but there is very little flow today,” a trader said.

The gains came as new Prime Minister Binali Yildirim calmed the markets by including Deputy Prime Minister Mehmet Simsek in his cabinet, a strategist said. Also helping the bonds was the news that the central bank will maintain a tight monetary stance.

“Turkey risk ended [Tuesday] fairly strong and remains well bid this morning,” he said. “Turkey CDS currently trades at 270 bps while cash is circa 5 bps tighter.”

He advised caution, though, because “new election risk continues to run high,” and “the new government's priorities lie with the new constitution and the implementation of the presidential system.”

Additionally, “the EU-Turkey migrant deal is also at risk,” he said.

Three Gorges trades

China Three Gorges Corp.’s new two-tranche issue of $1.5 billion notes due 2021 and 2026 received some attention in the secondary market on Wednesday.

The deal included $500 million 2.3% notes due 2021 that priced at 99.962 to yield 2.308%, or Treasuries plus 90 bps. On Wednesday the notes were spotted at 82.5 bps after trading as tight as 81.5 bps, a trader said.

The $1 billion 3¾% notes due 2026 priced at 99.804 to yield 3.173%, or Treasuries plus 130 bps. On Wednesday the notes were trading at 123 bps after trading as tight as 121 bps.

JPMorgan, Deutsche Bank, ICBC, Bank of China, Goldman Sachs and UBS were the bookrunners for the Rule 144A and Regulation S deal.

Qatar prices $9 billion

In its new deal, Qatar priced a $9 billion issue of notes due June 2, 2021, 2026 and 2046, a syndicate source said.

The $3.5 billion 2 3/8% five-year notes priced at 98.924 to yield Treasuries plus 120 bps after talk in the 125 bps area.

The $3.5 billion 3¼% 10-year notes priced at 98.963 to yield 150 bps after talk in the 155 bps area.

And the $2 billion 4 5/8% 30-year notes priced at 97.606 to yield 210 bps after talk in the 215 bps area.

HSBC, JPMorgan, MUFG and QNB Capital were the joint global coordinators and – along with al khaliji, Barclays, BofA Merrill Lynch, Deutsche Bank, Mizuho Securities and SMBC Nikko – the joint lead managers and joint bookrunners for the Rule 144A and Regulation S deal.

“The 30-year is going to reinvigorate Middle East long-end trading for a few days,” a syndicate source said.

Marfrig gives guidance

Brazil’s Marfrig Global Foods SA set talk in the low-to-mid-8% area for a benchmark-sized issue of dollar-denominated notes due in seven years, a market source said.

The company was expected to price the deal late on Wednesday.

Banco do Brasil, Bradesco, HSBC, Morgan Stanley and Santander are the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to fund a tender offer, to repay outstanding indebtedness and for general corporate purposes.

The company is offering to purchase for cash any and all of the outstanding 9 5/8% notes due 2016 issued by Marfrig Overseas and the 9 7/8% notes due 2017 issued by Marfrig Holdings. The company is also tendering for a capped amount of 8 3/8% notes due 2018 and 9½% notes due 2020.

CDB talks two tranches

China Development Bank Corp. set initial talk for a two-tranche issue of dollar-denominated and benchmark-sized notes due in five and 10 years, a market source said.

The five-year notes were talked at a spread in the Treasuries plus 105 bps area.

The 10-year notes were talked in the 145 bps area.

Bank of China, BNP Pariba, Bocom HK branch, China Construction Bank (Asia), HSBC, ICBC (Asia), KGI Asia, Mizuho Securities, MUFG Securities and Standard Chartered Bank are the bookrunners for the Regulation S deal.

The proceeds will be used for working capital and general corporate purposes.

The lender is based in Beijing.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.