Turkey bonds trade off slightly; ProCredit postpones deal; Middle East widens; JBS on deck

By Rebecca Melvin

New York, Oct. 17 – The Republic of Turkey’s newly priced bonds slipped in first-day trading as the emerging-markets debt space weakened slightly overall on Wednesday, and ProCredit Holding AG & Co. KGaA postponed pricing of its new notes issue after going out with initial price talk.

Turkey’s 7¼% global fixed-rate senior notes due December 2023 traded slightly lower after the sovereign price $2 billion of the notes at 98.917 on Tuesday. They were seen 99.30 bid, 99.40 offered, according to a London-based trader.

In the choppiness, Eastern Europe-focused ProCredit decided to postpone its inaugural euro-denominated sub-benchmark of three-year green bonds, according to a syndicate source.

The Regulation S senior unsecured transaction had been set to price on Wednesday and went out with initial price talk for a yield spread of mid-swaps plus 145 basis points.

But the company, which wrapped up roadshow meetings for the notes deal on Friday, said it has decided to “give investors additional time,” and it “wants to continue to work with accounts to ensure lines are in place before returning to the market.”

The German-based banking group focuses on small and medium sized enterprises in Eastern Europe. Deutsche Bank and ING were joint bookrunners for the notes transaction.

Sao Paulo-based meat processing company JBS SA guided pricing for its $500 million offering of senior notes due January 2026 to yield in the low-to-mid 7% area. The deal could price as early as Thursday.

Barclays, BB Securities, Bradesco BBI, BTG Pactual and Santander are joint bookrunners of the Rule 144A and Regulation S offering.

In the secondary market, the Middle East credits widened out a bit in the early going after positive trading the previous session. On Tuesday, Saudi Arabia had been 18 bps tighter.

U.S. Treasuries were higher before the release of the minutes from the Federal Reserve’s policy meeting in September and they dropped lower after the minutes were released, leaving the yield on the 10-year Treasury bond benchmark at 3.201%. Earlier in the session the yield on the 10-year was 3.157%.

In the minutes, the Fed signaled that a strong U.S. economy justifies continued interest-rate increases but stressed that it will be watching for evidence that moves are keeping economic growth on an even keel.

The trajectory forward is an uncertain one however, with fed officials trying to emphasize uncertainty about the precise level interest rates should be to support but not overheat the economy. Currently it is telegraphing one more rate increase this year and three hikes in 2019.

But right now the economy is expanding faster than what is expected to be sustainable over the long run. Meanwhile questions surrounding the U.S.-China trade war also mean it is difficult to predict how growth continues. The Fed removed a phrase from its Sept. 26 post meeting statement that current policy is accommodative, which is a step forward in its plan to get to a place of neutrality on the market.

The update does little to reassure emerging markets, where currencies are anticipated to remain volatile. The year so far has been a difficult one. From the end of April to August, the Turkish lira and Argentine peso sell by 40% and 50%, respectively, against the dollar. The lira is currently about 20% up from its August low, and the peso is up 15% since that time.

But the dollar, which was pointed to as a driver of emerging markets currency woes in the middle of this year, when it was moving higher, slipped on Wednesday and has fallen by 1% since the beginning of October.

Paul Harris contributed to this report.

© 2015 Prospect News.
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