Morning Commentary: Bonds from South Africa lower; Turkey narrows; Bank of Sharjah sets roadshow

By Christine Van Dusen

Atlanta, Jan. 30 – Bonds from South Africa underperformed and Turkey opened tighter – even after the latter sovereign suffered a ratings downgrade – on a quieter Monday, as many Asian markets remained on holiday for the lunar new year.

“Headlines from the weekend were mainly centered on [U.S. president Donald] Trump’s executive order to ban immigrants from seven predominantly Muslim countries, notably Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen,” a London-based analyst said. “The move has no direct impact on markets, but Trump’s executive orders weigh as a cloud of uncertainty across asset classes.”

Meanwhile, the euro zone is awaiting elections, he said.

Looking to Turkey, the sovereign was downgraded on Friday by Fitch Ratings to BB+ from BBB-. And S&P Global Ratings revised its outlook on the BB rating to negative from stable.

Turkey’s ratings are now fully in the non-investment-grade territory, the analyst said.

“While Fitch’s decision, in our opinion, was in line with market consensus, S&P’s revision of the BB rating to outlook negative from stable posed a surprise,” he said.

“Nonetheless, Turkish credit starts the week in a very resilient tone,” he said, noting that sovereign credit default swaps spreads entered the week between 4 basis points and 5 bps tighter and cash bonds six bps to 7 bps tighter.

The underperformer on Monday, instead, was South Africa. Sovereign cash was 3 bps to 5 bps wider heading into the morning session after senior leaders of the African National Congress said that president Jacob Zuma threatened to fire ministers who had called for him to step down.

“As we move into February, it will be a busy schedule, with nonfarm payrolls being the highlight at the end of the week,” he said.

In deal-related news, United Arab Emirates-based Bank of Sharjah will set out on Tuesday for a roadshow to market a dollar-denominated offering of benchmark-sized notes due in five years, a market source said.

Bank ABC, Emirates NBD Capital, JPMorgan and National Bank of Abu Dhabi are the bookrunners for the Regulation S deal.

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