Romania notes slip on debut; new Enel Chile adds; Argentina mostly steady as peso drops

By Rebecca Melvin

New York, June 8 – The new Romania 5¼% notes slipped in trade on Friday after the sovereign’s ministry of public finance priced $1.2 billion of the 30-year paper on top of guidance and slightly tight to initial price talk.

The new Romania notes were seen at 97½ bid, 98.30 offered after the deal priced at a reoffered 98.867, a London-based market source said.

The new Enel Chile SA 4 7/8% notes traded up on the break after the power company priced $1 billion of the 10-year notes to yield U.S. Treasuries plus 210 basis points.

The new Enel Chile notes were 99½ bid, 99.80 offered from a reoffered price of 98.824, a New York-based market source said.

Enel Chile’s $1 billion deal was viewed as a something of a tour de force given that the Latin America primary market has been in an issuance drought.

The last benchmark-sized deal was Hunt Oil Co. of Peru LLC’s $600 million of 6 3/8% 10-year notes priced on May 25. Before that there was a flurry of deals that priced at the end of April, but they were mostly small- to medium-sized deals of $200 million to $600 million.

Elsewhere, the Argentine peso fell to a record low in reaction to news that the country inked a deal with the International Monetary Fund on Thursday for a $50 billion credit line. Argentina credit held in in the early going but slipped some late in the day.

The peso fell 1.3% to 25.31 on Friday from 24.9850 on Thursday. Earlier the currency had been down by 2.2%.

According to reports the IMF’s $50 billion credit line to Argentina is the largest such agreement in the history of the Fund. In exchange, Argentina has agreed to cut fiscal spending faster, give the central bank more independence and change its inflation targets. Argentina sought the funding after a sharp selloff in the peso in May amid global volatility and growing concern about the central bank’s efficacy.

Argentina’s 7 1/8% notes due 2117 were last 86¾, which was down five cents on the day.

Argentina’s 8.28% notes due 2033 were 103.04 bid, 104.96 offered and indicated up 20 cents on the day.

Argentina’s 5 7/8% notes due 2028 were last 89.65, which was down a nickel on the day after trading up as high as 89.85 on Friday and as low as 89.60.

This past week S&P’s and DBRS rating agencies affirmed Argentina’s long-term foreign currency issuer ratings. S&P’s affirmed Argentina’s long-term sovereign credit rating at B+ with a stable outlook. S&P’s said its stable outlook is based on the expectation that the Macri administration will implement additional austerity-based economic measures in the coming six months to contain and reverse inflation, reduce its fiscal deficit and stabilize the economy. And DBRS confirmed Argentina’s long-term foreign currency rating at B, saying the trends on all ratings remain stable, reflecting Argentina’s progress in reducing macroeconomic imbalances.

Currency woes that were concentrated on the Turkish lira and Argentine peso in May appear to have spread out in June to affect the South African rand and Brazilian real this week.

Bonds from Brazil were mostly better as the real rebounded following the country’s central bank promise to flood the market with currency swaps. Earlier this week the markets ignored the Brazilian central banks attempts to shore up the currency, and the currency spiked to a two-year low on Thursday.

Looking ahead to next week, investors will be on Fed watch as the Federal Open Market Committee convenes a two-day policy meeting, which is widely expected to conclude with a rate hike, representing the central bank’s second this year. In Europe, there is divided opinion as to whether the European Central Bank will announce the conclusion of its bond purchases program after September when authorization of its bond-buying program expires.

The Fed is expected to lift despite the trouble occurring in emerging markets and Europe, with pundits pointing to the strong May jobs report as a key data point considered by the policy makers.

There are a handful of issuers expected to price deals next week including Empresas CMPC SA and Frontera Energy Corp. from Latin America and EPP NV, formerly known as Echo Polska Properties, for the CEE euro market.

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