EM rallies into end of week on ECB speculation; Namibia, Eco-City trade; Lebanon deal ahead

By Christine Van Dusen

Atlanta, Oct. 23 – Emerging markets assets finished the week on strong footing, with Asian bonds “on fire” on Friday as investors speculated that the European Central Bank could engage in further easing.

The ECB met and did not further ease its monetary policy, but the bank hinted at doing so in December.

In response, spreads moved between 3 basis points and 10 bps tighter on Friday morning.

“Asian credits started the day 5 bps to 8 bps tighter with the positive backdrop overnight,” a London-based trader said. “The market pulled back to 1 bp to 3 bps tighter after some real money decided to take profit. In the afternoon session, momentum picked up again, with real-money buyers out of Europe, and we finished the day 5 bps to 8 bps tighter.”

Banks from Korea were 1 bp to 3 bps tighter amid limited demand, he said, while India’s banks tightened 2 bps to 5 bps with some buyers.

The new issue of notes from Namibia – $750 million 5¼% notes due 2025 that priced Thursday at 99.043 to yield 5 3/8% – was quoted at par bid, 100¼ offered, a trader said.

The notes were talked at a yield in the 5¾% area.

Barclays Capital, JPMorgan and Standard Bank were the bookrunners for the Rule 144A and Regulation S deal.

In other trading on Friday, Tianjin Eco-City Investment and Development Co. Ltd.’s new RMB 1 billion 4.65% notes due 2018 that priced Thursday at par traded at 100.40 bid, 100.70 offered, a trader said.

The notes were talked at a yield in the 4.7% area.

Bank of China and Bank of China (Hong Kong) were the bookrunners for the Regulation S deal.

The proceeds will be used for operational working capital and general corporate purposes.

Lat-Am in focus

Many Latin America bonds were “markedly stronger” during the Friday session, a New York-based trader said.

“Tough to decipher if any particular country or sector is leading us higher, but [Petroleo Brasileiro SA] has joined the party after quite the lackluster week – only buyers, and bonds up over one point, which has now become known as a big intraday move,” he said. “We also see [Vale SA] moving much tighter, 10 bps at least, as their third-quarter numbers looked OK.”

Other credits from Brazil also jumped higher during the day, he said.

And Mexico’s Cemex SAB de CV recovered from much of the prior day’s weakness, he said.

High-grade bonds from Chile moved higher again on Friday and were difficult to source, another trader said.

“Colombia banks are getting close to become bid,” he said.

Default swaps tighten

Five-year credit default swaps spreads for Brazil were tighter on Friday, closing at 450 bps from 461 bps, while Mexico’s moved to 148 bps from 153 bps.

“Cash prices continue their grind higher in a somewhat orderly fashion, with standard EM gaps here and there,” a trader said. “Venezuela moved higher, despite oil weakness.”

Venezuela’s 2027s closed at 43 from 42.75 while PDVSA’s 2017s finished Friday at 72 from 71, he said.

“Argentina bonds performed well all week,” he said. “Flows today saw better buyers of Latin American low-beta in the morning, with volumes tapering off into the afternoon.”

Lebanon to issue new notes

Lebanon is looking to issue new notes as part of an exchange offer, according to an announcement from the sovereign.

Lebanon is looking to exchange its $750 million 8½% notes due 2016 for new longer-dated notes, which are expected to be issued on Nov. 4.

Citigroup, Fransabank, Societe Generale de Banque au Liban and Standard Chartered Bank are the dealer managers for the exchange offer.

© 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.