Indonesia’s Agung Podomoro prices bond; markets quiet ahead of holidays; LatAm steady

By Rebecca Melvin and Colin Hanner

New York, May 25 – A handful of new issues priced in emerging markets on Thursday ahead of upcoming holidays. These deals included a $300 million 5.95% bond by Indonesia’s Agung Podomoro Land Tbk and a KZT 1 billion 13½% bond by Kazakhstan’s Faeton Co. Both issuers are in the real estate sector, and both bonds are seven-year paper.

In addition, the JSC Bank of Georgia sold 500 million lari of 11% three-year notes at par on Thursday, and GTLK Europe DAC sold $500 million 5 1/8% seven-year notes at par on Wednesday.

Overall, however, the emerging markets had a quiet tone as business wound down for various holidays, including three-day weekends ahead for the United States and the United Kingdom, closures in Europe for Ascension Day for the latter part of this week and in the Middle East Ramadan beginning on Friday.

“Expect tomorrow to be dead into the bank holiday weekend,” a market source said. “But if the tone in [U.S. Treasuries] holds, the supply taps will surely be open again next week.”

The yield for the 10-year Treasury note added 0.4 basis point to 2.256% on Thursday.

The credit markets didn’t react notably to news that the Organization of Petroleum Exporting Countries extended production cuts until March 2018. In the Middle East, emerging market credit was “holding firm,” with “no real moves in spreads,” a market source told Prospect News via e-mail.

Meanwhile, Qatar-based real estate developer Ezdan Holding Group, whose equities plunged following the company’s decision to go private, saw its bonds remain firm. The Ezdan $500 million 4 7/8% notes due 2022 were quoted at 100¾ bid, 101½ offered, which was up 30 bps on the week, a market source said.

Elsewhere, Turkish banks opened firm, a market source said, with Ascension Day in Europe and the release of the Federal Reserve minutes on Wednesday “fueling the risk-on fire.”

Vakifbank, Garanti Bank, Fibabanka and Ziraat Bankasi were all attracting solid support, a market source said.

While position changes in the Middle East ahead of the holidays was light, in the Latin America credit markets, the holidays were a non-issue.

“A lot of issuers have done what they needed to. Our market is not that busy. Last week we had the Petrobras deal, but the holidays don’t make that much difference,” a New York-based fixed income syndicate source said.

At the same time, the end of earnings season is not expected to produce a significant pop in issuance, the source said.

In Brazil, many issuers tend to report later. In the United States, companies are coming out of earnings, but there is not a big backlog in our market,” the source said.

Following a fairly active first quarter, Latin America is expected to continue to experience flow levels that are typical from sovereigns and quasi-sovereign issuers.

“Pemex and Petrobras, the Republic of Mexico and the Republic of Brazil are always fixtures, with the rest is a 50-50 mix of sovereign to corporate debt,” the source said.

For the year to date, Brazil is the lead issuer, followed by Argentina, with Mexico lagging for 2017 so far.

“Mexico is behind” because of what was happening in the political arena between the republic and new U.S. President Donald Trump, a source said.

Brazil has been able to price quite a few shorter-dated bonds and, despite the upheaval in credit last Thursday in response to a corruption scandal that flared up around President Michel Temer, the market has been relatively calm, a source said.

Credit default spreads have widened to about 240 bps from 200 bps, but that represented the tightest point of the year and comparing it the worst moment.

Credit has been gradually recovering in Brazil, the source said. “They held in well considering how big the political developments have been. International investors have been reacting rationally.”

In Brazil, protestors have taken to the streets to force the resignation of Temer, and Brazilian troops were sent in to the protest sites to restore peace as recently as Wednesday evening.

But the news reports of these protests are overblown, the market source said.

Brazilians are protesting the discovery of audio tapes that surfaced that could link Temer to bribery.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.