PPF Arena lifts from issue; QNB’s new 3 1/8% notes mostly flat; sovereign spreads wider

By Rebecca Melvin

New York, March 22 – Emerging markets debt issues continued to price on Friday as secondary markets widened in action that continued to be influenced by a shift in market expectations after the U.S. Federal Reserve took a planned interest rate increase off the table on Wednesday.

Central & Eastern Europe-focused PPF Arena 1 BV’s newly priced 3 1/8% seven-year notes traded up to 101 on Friday after the telecom infrastructure company priced a debut issue of €550 million of notes at par, according to a market source.

Qatar National Bank QPSC’s new 3˝% notes were mostly flat, however, after the lender priced $1 billion of the five-year paper at 99.144 to yield mid-swaps plus 130 basis points.

The new QNB notes were quoted at 99.08 bid, 99.18 offered, according to second market source.

Overall, spreads widened on Friday heading into the weekend as emerging markets credits continued to catch up with an outsized move in U.S. Treasuries this week.

EM was having a tough time keeping up with the move in Treasuries, a London-based market source said.

Generally speaking, spreads have been rangebound for the better part of the year between 360 bps to 380 bps for the emerging markets sovereign bonds index, or the J.P. Morgan EMCI global. After the U.S. Federal Reserve’s policy update on Wednesday, when policy makers kept rates unchanged and removed a rate increase from its outlook for this year, sovereign spreads widened somewhat but remained in that range.

Returns were robust for the first quarter but were expected to flatten out for the second and third quarters.

“Post government shutdown and post Fed, there aren’t a lot of changes expected,” a New York-based market source said.

Emerging markets sovereign bond returns stand at about 5.95% for the year to date for the EMBI global. High yielding sovereign bonds have returned 4.6% for that time period, and investment grade sovereign bonds have returned 7.95%. Within high yield, Africa sovereigns have returned 9.4% and Latin America sovereigns have returned 7.4%, according to the market source.

The outlook for patience from the Fed and a wait and learn stance put expectations for further gains on a lower rung. That said, there is still demand for risk assets. “[Investors] are on-sides for sovereign debt,’ the source said. Going into the year there was a lot of caution following the pull back in the last two months of 20128, but that attitude toward shorter-maturities and more guarded stance gave way to a stronger appetite for risk, the source said.

In primary market action on Friday, Istanbul-based glass manufacturer Turkiye Sise ve Cam Fabrikalari AS, or Sisecam, priced a $150 million tap of its 6.95% seven-year notes after pricing the original deal of $550 million earlier this month. The 6.95% notes (rating: Ba2//BB+) priced at 99.724 to yield 7%. The proceeds will be used for general corporate purposes and refinancing, including the repurchase of the company’s outstanding May 2020 notes.

Citigroup, BNP Paribas, HSBC and JPMorgan were bookrunners for the Rule 144A and Regulation S notes.

Word emerged on JSC Bank of Georgia, a subsidiary of Bank of Georgia Group plc, which priced its debut offering of $100 million of 11 1/8% additional tier 1 capital perpetual subordinated notes (rating: //B-) at par on Thursday.

The Regulation S Bank of Georgia notes are non-callable for 5.25 years.

J.P. Morgan and UBS Investment Bank acted as joint bookrunners, and Galt & Taggart was acting as a co-manager. The financial institution is based in Tbilisi, Georgia.

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