Deals from Aegea Saneamento, Saudi Arabia, Ziraat Bank on tap; existing Saudi notes widen

By Rebecca Melvin

New York, Sept. 25 – Emerging markets were quieter and spreads somewhat wider on Monday, compared to last week.

There was some new paper getting a once over. Brazil’s Aegea Saneamento set a roadshow for dollar-denominated notes due 2024, Saudi Arabia was offering notes in five-, 10- and 30-year tranches and Turkiye Cumhuriyeti Ziraat Bankasi AS guided talk on a new dollar-denominated benchmark of six-year notes.

The initial order book for the Ziraat notes was for more than $1.4 billion, and the notes were talked to yield 5¼% to 5 3/8%, which was tightened from initial talk of 5 3/8% to 5½% yield.

Back in established issues, some Saudi existing notes widened on the promise of new notes pricing for that curve. The near-dated Saudi 2 3/8% notes due 2021 were indicated at 98.83 bid, 98.95 offered, with the z-yield spread widening out 6.6 basis points, according to a market source.

The Saudi 2022 notes with a 2.894% coupon were at 100.18 bid, 100.43 offered with a yield spread that wider by only 1.5 bps.

The Saudi 2026 and 2027 notes were wider by 5.5 bps and 4.6 bps, respectively, and the Saudi 4½% notes due 2046 were at 100.87 bid, 101.37 offered, with a z-spread that was 6.2 bps wider.

In Latin America, Brazil’s spreads were about 3 bps wider on average, approximately matching a 3 bps contraction in U.S. Treasury yields.

“It was a very slow start,” a New York-based market source said, noting that spread change was about flat net-net.

In addition to Aegea Saneamento, the Latin America market had Cydsa SA in the pipeline for pricing this week. But other than that, it was quiet, market sources said.

They chalked up malaise in the financial markets to a combination of Monday doldrums, geopolitical tensions and the fact that recovery efforts are underway in Mexico following last week’s strong earthquake.

More bellicose rhetoric flying between the leaders of North Korea and the United States was attributed to some unnerving in U.S. markets, and investors were also trying to digest the results of the weekend elections in Germany.

German Chancellor Angela Merkel prevailed for a fourth term, but her Christian Democrat party stumbled, which means Merkel had much work to do to establish the Christian Democrat-led coalition. The election yielded results that allow the first far-right party to enter the parliament in more than 50 years.

Emerging markets were also watching the voting in the Kurdish Independence referendum that went ahead despite warnings from the Iraqi central government and neighboring Turkey.

“A ‘yes’ vote in favor or independence is highly likely although not binding, with the KRG President rather seeing it as a mandate to go into ‘very long’ separation talks with Baghdad,” MUFG Securities strategist of CEEMEA credit Trieu Pham wrote in a note on Monday.

Turkey is strongly against the referendum, with Turkey’s National Security Council and cabinet on Friday saying that the ballot is a direct threat to national security, and on Sunday the parliament extended its mandate for military operations in Iraq and Syria for another year. “That said, Turkey has not specified any measures against the KRG to this point,” Pham wrote.

© 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.