Jamaica, CCB sell notes; Lat-Am widens, then tightens; Islamic perpetuals lag; HNA ahead

By Christine Van Dusen

Atlanta, Aug. 11 – Jamaica and China Construction Bank (Singapore branch) sold notes on Thursday as investor fatigue led cash prices for some emerging markets assets to dip on low volume, though Latin America remained firm.

“The market seems to be experiencing a bit of a hangover from yesterday’s rip-fest that had almost any offer lifted in the cash market,” a trader said in the morning. “It could be some opportunistic selling, as nothing macro-wise should suggest that market needs to be lower aside, from a pinch of Treasury weakness, which should be balanced by higher futures for equities.”

Latin American bonds saw buyers outweigh sellers before switching direction as the Treasury sell-off intensified later in the day, another trader said.

“Yesterday we saw a renewed drop in oil prices on the back of an increase in crude inventories and news that Saudi output has reached a new record,” a London-based analyst said. “Aside, it is fairly calm in terms of events and data in developed markets, which gives us the opportunity to focus on EM.”

Middle Eastern bonds, meanwhile, saw “very solid demand again,” a London-based trader said. “Any oil or U.S. Treasury-related moves are shrugged off as the inflows, cash balances, year-to-date returns, ETF demand, summer lull and the relative lack of recent issuance combine in a perfect combo to drive performance.”

Only a few names lagged, including some Islamic perpetual bonds, but, “overall, another decent effort by the market,” he said.

From Ukraine, bonds have been slightly weaker, following the assertion by Russian leaders that Ukraine had attempted an incursion into Crimea, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“The weakness was limited, however,” he said. “Quasi-sovereigns were close to unchanged.”

Lat-Am in focus

Taking a closer look at Latin America, assets rallied on the move in oil, with five-year credit default swaps spreads for Brazil closing at 259 basis points from 263 bps, a New York-based trader said.

Mexico’s CDS moved to 136 bps from 138 bps.

“Latin American high yield finishes firmer on the day, with both Venezuela and Argentina higher,” he said.

Indeed, PDVSA’s 2017s closed at 72.60 from 72, and Venezuela’s 2027s at 46.65 from 46.50. Argentina’s Bonar 2024s finished at 117.75, mostly unchanged, while its 2026s ended at 111 from 110.75.

Zambia eyed

Some investors were keeping an eye on Zambia as the country began to vote for a new president and parliament.

“There have been clashes amid the campaigning,” the analyst said. “Investors are certainly hoping for a new government that implements economic reforms to turn [around] the ailing Sub-Saharan African country, gripped by falling copper prices, droughts and power shortages.”

After the election, it is likely the focus will shift to the International Monetary Fund, with whom loan talks are on hold.

“A clear outcome and a peaceful transition of a government with a clear bid to transform the economy with the support of international financial institutions would be the best outcome for Zambia bonds, although a run-off – to be held within 37 days – is currently seen as the most likely outcome.”

Jamaica sells bonds

In its new deal, Jamaica priced a $364,146,000 tap of its 8% amortizing notes due March 15, 2039 at 114.082 to yield 6¾%, a syndicate source said.

Price talk was initially set in the 7% area, then narrowed to 6 7/8% before the pricing.

Jamaica will pay principal on the notes in three installments, with 33.33% due on March 15, 2037; 33.33% due on March 15, 2038; and 33.34% due on March 15, 2039, according to a filing from the sovereign.

Jamaica will pay interest on the outstanding principal of the notes semiannually in arrears on March 15 and Sept. 15 of each year, starting on Sept. 15 of this year at an annual rate of 8%.

The proceeds will be used to finance a tender offer. Jamaica is buying back its 10 5/8% bonds due 2017 at 108.00 and its 8% notes due 2019 at 110.50.

The original issues of 8% notes due 2039 came to the market on March 8, 2007 and Oct. 11, 2007.

Citigroup and BofA Merrill Lynch were the bookrunners for the Regulation S deal.

CCB prices notes

Also on Thursday, China Construction Bank priced a RMB 1 billion issue of notes due in 2018 with a coupon of 3¼%, a market source said.

CCB Singapore, CCB International and DBS were the joint global coordinators. Agricultural Bank of China Singapore, Bank of China and CCB Asia were the lead managers and bookrunners.

Other details were not immediately available on Thursday.

HNA markets notes

China’s HNA Group Co. Ltd. is marketing a $300 million issue of notes, a market source said.

Other details were not immediately available on Thursday.

The issuer is a Haikou City, China-based business conglomerate that focuses on airport services, air transportation, real estate, hotel and catering, travel services, commercial retail, logistics and transportation, financial services and network information technology businesses.

© 2015 Prospect News.
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