South Africa does deal on risk-off day; spreads widen, prices slump; roadshow for Vakifbank

By Christine Van Dusen

Atlanta, April 7 – The Republic of South Africa sold notes as stocks dropped on a volatile, risk-off Thursday that had many emerging markets spreads widening and cash prices slumping.

“Unlike yesterday, the market feels a little vulnerable overall, and certainly timid, but I can’t say offers are coming in lower in the aggregate,” a New York-based trader said.

Latin American bonds were quiet on Thursday morning, with Colombia-based Ecopetrol SA moving lower again amid “no action whatsoever on the name today so far,” he said.

Mexico-based Cemex SAB de CV remained weak, particularly on the long end, he said.

“We’ll see if the recently stronger-traded credits like [Brazil-based Gerdau SA] move lower, as [Brazil-based Vale SA] opened stronger but seems to be tapering off, except for the squeezed 2019s and 202s, which are unchanged to higher.”

Five-year credit default swaps spreads for Brazil widened to 401 basis points from 383 bps, while Mexico’s moved to 179 bps from 169 bps.

“Cash prices are unable to hold on to yesterday’s levels, as spread-widening more than offsets any benefit from the United States Treasury rally,” another New York trader said.

High-yield names from Latin America were mixed on Thursday, with Argentina remaining firm but Venezuela’s curve steepening.

Venezuela’s 2027s were down at 37.50 from 38 while PDVSA’s 2017s closed at 51.25 from 51.75. Argentina’s Bonar 2024s were unchanged, at 108.25, he said.

“Flows on the lighter side today, as has been the case recently during periods of market weakness,” the trader said. “The market did have an OK turnaround and pared some losses at the end of the day, and hopes are that Asia can see this as a buy-the-dip scenario, and we can open with a firmer tone tomorrow.”

Vakifbank sets roadshow

Turkey’s Turkiye Vakiflar Bankasi TAO (Vakifbank) will set out on April 12 for a roadshow to market a euro-denominated notes via Barclays, BNP Paribas, Erste Group, Natixis and UniCredit in a Regulation S deal.

In other deal-related news, market sources were whispering about two possible deals: Russia’s OAO Sibur Holdings could issue as much as $700 million of bonds this year, and Lebanon is reportedly contemplating an issue of at least $1 billion of notes.

South Africa prices notes

In its new deal, South Africa priced $1.25 billion 4 7/8% notes due April 14, 2026 at 98.631 to yield 5.051%, or Treasuries plus 335 bps, according to a filing from the sovereign.

The notes were talked at a spread in the 350-bps area.

Citigroup Global Markets, Rand Merchant Bank and the Standard Bank of South Africa were the lead managers for the Securities and Exchange Commission-registered deal.

The co-lead manager was Investec.

Proceeds will be used for general purposes of the government.

Issuance from ICD

On Wednesday, Islamic Corp. for the Development of the Private Sector (ICD) sold $300 million 2.468% Islamic bonds due April 13, 2021 at par to yield 2.468%, or mid-swaps plus 130 bps, a market source said.

Bank ABC, Boubyan Bank, CIMB, Dubai Islamic Bank, Emirates NBD Capital, First Gulf Bank, HSBC, Mizuho Securities, Societe Generale CIB and Standard Chartered Bank were the bookrunners for the Regulation S deal.

The issuer – a financial institution that supports member countries through investment in the private sector – is based in Jeddah, Saudi Arabia.

Ahli Bank sells bonds

Also on Wednesday, Qatar’s Ahli Bank QSC priced a $500 million issue of 3 5/8% notes due April 13, 2021 at 99.394 to yield 3.759%, or mid-swaps plus 260 bps, a market source said.

The pricing matched talk, set at 260 bps.

HSBC, Barclays and QNB were the bookrunners for the Regulation S deal.

The lender is based in Doha.

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