Fed statement supports EM; BankMuscat, Vakifbank trade higher; Dominicana, Boubyan on deck

By Christine Van Dusen

Atlanta, April 27 – Trading of emerging markets assets was somewhat slow on Wednesday morning, then picked up a bit after the Federal Reserve released its statement, which suggested a slight possibility of a rate hike in June.

“Global financial assets cheer an expectedly dovish Fed as EM credit spreads tighten and cash prices jump,” a trader said.

Sentiment towards emerging markets should not deteriorate in the short term, according to a report from Commerzbank.

“This does not mean the Fed thinks the external environment is hunky dory and therefore we can expect a rate hike in June,” the report said. “On the contrary, the external environment largely improved precisely because of the more modest Fed rate-hiking cycle, which the FOMC indicated at the March meeting.”

The Fed is likely to err on the side of caution, “given that the risks of hiking too soon outweigh the risks of waiting a while longer,” the report said.

Still, “futures are pricing in a probability for a Fed rate hike at the June meeting just above 20%,” a strategist said. “The dovish-perceived Fed has been one of the key drivers for the good performance in [emerging markets] as of lately.”

Market-watchers were also keeping an eye on Turkey, where new leadership at the central bank “has removed many tail risks for Turkey investors,” he said.

In deal-related news, whispers circulated about Tunisia, which had been expected to hold a roadshow last week for an offering of euro-denominated notes but postponed. The sovereign could issue up to $500 million in bonds in the next few weeks, sources said.

Lat-Am in focus

Looking to Latin America, Brazil outperformed as positive political developments boosted sentiment, a New York-based trader said.

“The credit continues to trade on idiosyncratic factors in addition to more macro themes,” he said.

Brazil’s five-year credit default swaps spreads closed at 333 basis points from 346 bps, while Mexico’s moved to 152 bps from 157 bps.

“Cash prices hit highs of the day, post-Fed, as a U.S. Treasury rally helps to boost levels,” he said.

Venezuela, PDVSA tick higher

Venezuela saw its 2027s move to 41.50 from 40.25, while PDVSA’s 2017s closed at 56 from 54.75.

Argentina’s Bonar 2024s were mostly unchanged at 113.50 while its 2026s were up to 102.45 from 102.25, the trader said.

“It feels like deja vu all over again, as markets rally post-Fed in similar fashion to last meeting,” he said. “It will be interesting to see how overseas markets interpret today’s price action and whether we see some follow-through tomorrow.”

Middle East sees some activity

Abu Dhabi’s Mubadala GE Capital Ltd. could issue bonds soon, market sources said.

“Little less busy than yesterday, but still plenty of activity,” a trader said. “There remains plenty of chatter in the secondary market about further issuance from the region before Ramadan.”

In trading from the Middle East, Abu Dhabi National Energy Co.’s 2023s and 2024s struggled, moving about 15 bps wider on the week, he said. And Saudi Electricity Co.’s long end was popular, pushing about 33 bps tighter during the month.

BankMuscat performs

The new notes from Oman’s BankMuscat performed well in trading on Wednesday, a trader said.

The lender priced $500 million 3¾% notes due 2021 at 99.311 to yield mid-swaps plus 260 bps, matching talk.

The issue closed the European session at 99.70 bid, 99.80 offered, he said.

“Has a good technical feel to it, with good retail following,” he said.

Bank ABC, Bank Muscat SAOG, Citigroup, Credit Agricole CIB, HSBC, MUFG Securities, Naitonal Bank of Abu Dhabi and Standard Chartered Bank as joint lead managers and bookrunners for the Regulation S offering.

Vakifbank moves up

In other trading, the new issue of notes from Istanbul’s Turkiye Vakiflar Bankasi TAO (Vakifbank) – €500 million 2 3/8% notes due 2021 that priced at 99.059 to yield mid-swaps plus 250 bps – traded at 100.05 bid, 100.20 offered, a trader said.

Barclays, BNP Paribas, Erste Group, Natixis and UniCredit were the bookrunners for the Regulation S deal.

Sigma Alimentos draws orders

Mexico-based Sigma Alimentos SA de CV new issue of $1 billion 4¼% notes due 2026 received some attention, drawing a final order book of $3.5 billion, a market source said.

The notes priced at 99.797 to yield Treasuries plus 225 bps, following talk in the 262.5 bps area.

BofA Merrill Lynch and JPMorgan were the active bookrunners for the Rule 144A and Regulation S deal. MUFG Securities and Rabo Securities were the passive bookrunners.

The proceeds will be used to pay certain existing bank indebtedness and for general corporate purposes.

BOAD holds investor call

Banque Ouest Africaine de Developpement (West African Development Bank, or BOAD) on Wednesday held an investor call to market a dollar-denominated issue of benchmark-sized notes, a market source said.

BNP Paribas, Deutsche Bank, JPMorgan and Standard Bank are the bookrunners for the Rule 144A and Regulation S deal.

The lender is based in Lome, Togo.

Investor calls for Guatemala

Guatemala is hosting investor calls on Wednesday and Thursday to market a dollar-denominated issue of notes, a market source said.

BofA Merrill Lynch is arranging the calls, and leading the Rule 144A and Regulation transaction.

Other details were not immediately available on Wednesday.

Roadshow for Dominicana

Dominican Republic-focused AES Andres Dominicana SPV will embark on Friday for a roadshow to market a dollar-denominated issue of notes, a market source said.

Citigroup and Credit Suisse are the bookrunners for the Rule 144A and Regulation S deal.

Andres Dominicana is a special purpose vehicle for Virginia-based AES, a private power generator in the Dominican Republic.

Boubyan sets roadshow

Kuwait’s Boubyan Bank KSCP will set out on May 1 for a roadshow to market a dollar-denominated issue of perpetual Islamic bonds, a market source said.

Boubyan Capital, HSBC and Standard Chartered Bank are joint global coordinators for the Regulation S sukuk. Boubyan Capital, Dubai Islamic Bank, Emirates NBD Capital, HSBC, KFH Capital, National Bank of Kuwait and Standard Chartered Bank are joint lead managers and bookrunners.

The roadshow will begin in Abu Dhabi and Dubai and travel to Hong Kong, Singapore and London before concluding on May 9 in Zurich and Geneva.

The company in February announced that it had received regulatory approval to issue $250 million of Islamic bonds.

The Islamic lender is based in Kuwait City.

Gruposura sells upsized notes

On Tuesday, Colombia’s Grupo de Inversiones Suramericana SA priced an upsized $550 million of 5½% notes due April 29, 2026 at 98.866 to yield 5.65%, or Treasuries plus 371.9 bps, a market source said.

Final talk for the deal, which was initially sized at $540 million, was set in the 5¾% area. The notes were initially talked at a yield in the 6% area.

BofA Merrill Lynch and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

The notes were issued via Gruposura Finance and guaranteed by Grupo de Inversiones Suramericana.

The proceeds will be used to pay existing bank indebtedness and for general corporate purposes.

The issuer is an investment company based in Medellin.

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