Emerging market debt lower on Treasury weakness; two corporates hit the road

By Reshmi Basu and Paul A. Harris

New York, Oct. 30 - Emerging market debt was a tad softer Monday, as both U.S. stocks and Treasuries fell in response to the government's personal income and spending report for September.

In the primary market, two more issuers plan to hit the road this week. JSC Astana Finance of Kazakhstan is scheduled to start a roadshow for a dollar-denominated offering of five-year eurobonds (Ba1//BB+).

The roadshow will start on Wednesday, with stops in both Asia and Europe.

JP Morgan is the bookrunner for the Regulation S transaction.

And Bank Saint-Petersburg OJSC (B1/-/B) plans to start a roadshow on Thursday week for its inaugural offering of dollar-denominated bonds.

ABN Amro and Dresdner Kleinwort are joint bookrunners for the Regulation S deal.

EM lower on U.S. markets, oil

In trading, emerging market debt edged lower, triggered by weakness in U.S. core financial markets on the back of U.S. economic data. U.S. personal income rose by more than expected. But even as income increased, personal spending was down.

That news overshadowed the results of Sunday's presidential election in Brazil. As expected, president Luiz Inacio Lula da Silva easily secured his second term in Sunday's run-off vote.

Post-election, Brazil opened softer as spreads kicked out by about 3 basis points. Since Lula's victory had already been priced in the market, the U.S. external side trumped local news, noted a trader.

One market source said that the Brazilian benchmark bond due 2040 has hit a ceiling at around 131½ bid.

In trading, Brazil was down on profit-taking, a source added. The 2040 bond was down 0.25 to 131.40 bid, 131.40 offered.

Meanwhile this week, investors will be looking to see if a cabinet shake-up ensues, although that is a highly unlikely event, said an analyst, who added that Lula's landslide victory fuels worries that fiscal policy will slacken down the road.

Oil slump hits Ecuador, Venezuela

Declining oil prices took a swipe at oil exporters such as Ecuador and Venezuela, noted the trader.

During the session, the Venezuelan bond due 2027 eased 0.90 to 123.80 bid, 123.95 offered while the Ecuadorian bond due 2030 lost 0.60 to 100 bid, 100.40 offered.

In other news, Uruguay found support from the country's announcement that it will buy back $1.14 billion in bonds in an effort to extend the maturities on its sovereign curve. In a tender and exchange offer for which the results were announced Monday, the government will issue about $879 million in its bonds due 2022 and 2036 while the rest will be paid with cash.

The news clearly helped the 2036 bond, noted the trader.

In the secondary, the 2022 bond added 0.85 bid to 108 bid, 108.60 offered while the 2036 bond moved up 1.50 to 102.60 bid, 103 offered.

Separately, the economic ministry said it would repay the debt it owes to the International Monetary Fund in the upcoming months.

Elsewhere, Russian bonds also eased Monday. The country's finance ministry submitted a proposal to boost spending in 2006 by 3.8% of total expenditure for 2006, citing additional revenues.

The move may indicate a loosing of fiscal policy, but the request is moderate, commented a market source.

During the session, the Russian bond due 2030 gave up 0.19 to 111.75 bid, 111.938 offered.

Overall, emerging market debt saw little support amid lower oil prices and weaker U.S. markets. At session's end, the JP Morgan EMBI Global index was down by 0.04% while spreads widened by 2 basis points versus Treasuries.

© 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.