Turkey notes soften; Isbank suffers but outperforms Halkbank; Lat-Am widens ahead of holiday

By Christine Van Dusen

Atlanta, March 24 – Bonds from Turkey were softer – with sovereign and bank curves better-offered – on a quiet Thursday morning for emerging markets assets, as investors planned to finish up early ahead of the holiday weekend.

“Rather quiet Thursday, as many take advantage of the Easter break to get away,” a trader said.

Turkey-based Turkiye Is Bankasi AS (Isbank) was in the news again after a court in Istanbul accepted an indictment of the bank’s chairman and 46 other defendants who have been accused of fuel smuggling.

Isbank is “starting to buckle under the weight of headlines,” he said, “but still outperformed [Turkey’s Turkiye Halk Bankasi AS (Halkbank)], where the spread to sovereign is already knocking at the wides.”

Investors were also keeping an eye on Brazil-based steel firm Companhia Siderurgica Nacional (CSN), which is planning to increase the price on flat steel by as much as 12% next month, according to a report from Schildershoven Finance BV.

“It could become a positive trigger for the company’s bonds, as CSN’s steel division is highly unprofitable at the moment,” the report said. “At the same time, iron ore subsidiaries generated some profit.”

The bonds could appeal to “extremely risky investors,” the report said.

Latin American debt, overall, finished wider and lower on Thursday, a New York-based trader said.

Brazil’s five-year credit default swaps spreads finished the day at 397 basis points from 391 bps while Mexico’s moved to 171 bps from 167 bps.

“Cash prices initially held some bid earlier on, but low volumes and a reversal in U.S. Treasury strength had us closing lower,” he said. “Latin American high yield also closes weaker on the day, with both Argentina and Venezuela lower.”

Venezuela, Argentina trade

Indeed, Venezuela’s 2027s finished at 39.75 from 40.50 and PDVSA’s 2017s closed at 51.625 from 52.50.

Argentina’s Bonar 2024s ended the session at 107.40 from 108.

“Flows were very subdued today, with scrappy two-way inquiry,” the New York trader said.

Ukraine bonds fluctuate

Looking to Ukraine, sovereign bonds “fluctuated around unchanged levels” during the week, “with some better bids at the long end,” said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

Meanwhile, Bahrain, Azerbaijan and bonds from Africa were weaker on softer commodity markets, a London-based trader said.

“We end the short week on a softer tone after some profit-taking from accounts,” he said. “Valuations did start to get on the tight side as we rallied in a straight line from the lows, which makes the Street reluctant to buy risk at current levels.”

Egypt softens

Notes from Egypt were particularly soft, widening as much as 40 bps from the previous week, a trader said.

“Pakistan also seems to have cooled off, with sellers emerging,” he said.

© 2015 Prospect News.
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