Poland gives guidance; Lat-Am widens on oil; investors await Yellen speech, watch Turkey

By Christine Van Dusen

Atlanta, Aug. 22 – Poland set price talk for an issue of panda bonds on a Monday that saw spreads for some emerging markets assets move wider amid oil weakness. Meanwhile, investors awaited Friday’s speech by Federal Reserve Chair Janet Yellen and kept an eye on the tumult in Turkey.

“Going into this morning, oil prices have given up some of their gains [from] last week, with Brent crude trading with a 40 handle again,” a London-based analyst said.

In news from Turkey, Fitch Ratings affirmed the sovereign’s BBB- rating but revised the outlook to negative from stable, the analyst said, as a result of political instability and security concerns.

“Slightly worse than expected, as some looked for an unchanged outlook,” a trader said.

A suicide bombing on Sunday in Gaziantep killed a reported 53 people.

“The negative outlook means that Turkey is at the brink of losing its investment grade rating at Fitch and Moody’s while S&P has the unsolicited rating already at BB negative,” the analyst said. “This could halt the spread normalization we have seen after the initial sell-off in the aftermath of the coup attempt.”

Still, “Turkey risk currently prices in a premium over other credits rated in the crossover region,” he said. “And a benevolent market backdrop might offset concerns of a potential downgrade for the near term.”

In trading on Monday, the sovereign curve steepened a touch, with better offers on the long end and bids in the short end, the trader said.

“Banks, although wider, are only marginally underperforming for now, as retail are better buyers on the platform,” he said.

Lat-Am in focus

Looking to Latin America, volumes were low on Monday and spreads moved wider as a result of oil weakness, a New York-based trader said.

Five-year credit default swaps spreads for Brazil closed at 255 basis points from 252. Mexico’s moved to 135 bps from 132 bps, he said.

“Cash prices remain well-bid as the Treasury rally helps to offset any effects of spread widening,” he said. “Lat-Am high yield finishes mixed on the day.”

Venezuela’s 2027s finished at 49.25 from 48.65, PDVSA’s 2017s closed at 75.75 from 74.25, and Argentina saw its Bonar 2024s moved down to 117.60 from 118 and its 2026s to 111.15 from 112.

“Scrappy two-way inquiry throughout the day,” he said.

Poland gives guidance

For its new deal, Poland set talk in the 3% area for a three-year issue of renminbi-denominated notes, a market source said.

Bank of China and HSBC are the joint lead underwriters for the panda bonds.

Pricing is expected to take place as soon as Thursday.

Egypt rating affirmed

In news from Egypt, the sovereign’s rating was affirmed at B3 by Moody’s Investors Service.

“The rating agency also acknowledged the recent staff-level agreement between the Arab Republic and the IMF, which is deemed credit-supportive,” the analyst said.

Sovereign bonds have outperformed others in the region, with Egypt’s 5 7/8% notes due 2025 tightening about 85 bps, he said.

© 2015 Prospect News.
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