Emerging markets improve on the day ahead of quarter-end, Easter; new Vrio deals slip

By Rebecca Melvin

New York, March 29 – Emerging markets were better on the day, but still limped quietly into the end of the first quarter on Thursday, ahead of the long weekend for Easter.

Bond markets closed early at 2 p.m. ET on Thursday and will remain closed on Good Friday. U.K. markets will remain closed on Monday.

Investors in emerging markets and the broader markets bought securities on Thursday, taking advantage of pricing that has been pushed down in recent selling. Shares of Facebook Inc., for example, recouped 4.4% on Thursday but are still down about 10% on the year on the Nasdaq Composite.

However buyers are not stepping in as consistently or as swiftly as they did previously, a New York-based market source said.

“In the rough patches before, investors used every opportunity to get back in. But now we are not seeing the buyers,” the source said.

After a very strong January in terms of new issuance and secondary market performance, the emerging markets began to pale in the middle of February, and benchmark indexes are currently negative for the year.

Despite unstable market conditions, some deals pressed through to pricing on Wednesday but not all of them priced well or traded up in the aftermarket.

Vrio Corp., AT&T Inc.’s DirecTV Latin American subsidiary, priced two deals for $1 billion of notes. The larger $650 million tranche of 10-year notes, however, priced at the high end of price talk and then traded down.

The new 6 7/8% notes due 2028, yielding 7%, were seen down ½ point in the early going on Thursday, according to a market source.

It makes investors less willing to go into a deal if it trades down, so it’s not good for the market, the source said.

When a large concession is taken and then the notes trade down, investors ask themselves why didn’t they just wait for the secondary, the source continued.

“Deals are coming with large concessions and I don’t think this is going to go away anytime soon,” the source said. “But it will be interesting to see what tone is like next week.”

In the Latin America region, two of four deals on the calendar ended up pricing this week. InRetail Real Estate Corp. priced $350 million of 5¾% notes due 2028 at par on Tuesday. But with the holiday hours away there was 0% chance that the other deals would price, a syndicate source away from the deals said.

Also new to the market on Thursday was the Arab Gulf nation of Bahrain’s $1 billion 7½-year sukuk, or Islamic bond. Those bonds were not heard in trade. The deal was larger than initially expected, compensating in part for a planned 12- and/or 30-year conventional bond that never priced.

The new sukuk was priced to yield 6 7/8%, which was the tight end of guidance in the 7% area.

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