Iraq prices first deal in a decade; Colombia prices $1.4 billion add-on; Venezuela fluctuates

By Rebecca Melvin

New York, Aug. 2 – Deals continued to trickle through emerging markets on Wednesday as issuers remained undeterred by the dog days of early August.

The Republic of Iraq priced $1 billion of 5½-year notes to yield 6¾%, which was the tight end of talk, and the Republic of Colombia priced a $1.4 billion add-on to its 3 7/8% notes due 2027 to yield a few basis points below the fixed coupon rate.

Asian Development Bank priced a $1.25 billion green bond, and TV Azteca SAB de CV priced a seven-year bond to yield 8¼% under Regulation S only.

“It’s not going to be too difficult for sovereigns and repeat issuers to continue to get things done for the next few weeks,” a New York-based market source said.

“Coldeco did a large deal last week and Colombia today. Increasingly it feels like most of them have been to market though, and certainly it will slow down [in August]. But then we will see a pretty busy September,” the market source said.

Coledco is a Chilean mining company that priced $2.75 billion of notes in 10- and 30-year tranches last week.

Back in established issues, the bonds of Venezuela and Petroleos de Venezuela SA moved lower early in the session and then retraced losses to end up on the day by 2 to 3 points.

“We went down and then we went up,” a Connecticut-based trader said, attributing the turnaround to news that the firm overseeing Venezuela’s electoral process announced it found evidence of tampering in the Sunday election to elect a national constituent assembly.

“We are not 100% what it was that moved the market, but there was some news on the tape that Smartmatic found tampering,” the trader said.

The higher prices across the curve came three days ahead of the first of five interest payments due on this debt this month.

These payments have been the focus of a lot of speculation regarding whether Venezuela is able to and willing to make the payments.

“We are hearing that they will pay,” a trader said regarding the first payment due Aug. 5.

If the payment is not made, the bonds are expected to drop sharply.

“We will know Aug. 7,” the trader said referring to the Monday following the Saturday payment due date.

Interest payments due this month total a little more than $700 million and are due on the Venezuela notes due 2031, the Venezuela notes due 2018, the PDVSA notes due 2022 and the Venezuela notes due 2022.

Venezuela’s 12¾% notes due 2022 closed Wednesday at 42 bid, 44 offered, compared to 42 bid, 42½ offered late Tuesday.

Elsewhere in Latin America, Argentina debt has been widening out amid some uncertainty related to its upcoming mid-term elections, and in Brazil, the focus was whether a congressional vote would go favor of president Michel Temer, allowing him to avoid trial for the first round of corruption charges. The market would view a vote against going to trial as positive.

Iraq brings new bond

Iraq’s new note issue was well received by investors and multiple times oversubscribed.

The last international bond that this sovereign priced was in 2006 with its notes due in 2028, a market source said.

Before pricing, the yield on the Rule 144A and Regulation S Iraq notes was expected to print below talk in the lower mid- to high-6% range, according to MUFG credit analyst Trieu Pham.

Pham’s call was based on technical support and an announcement by the International Monetary Fund that completion of the second review of the Stand-By Arrangement provides another $825 million of facilities.

A lower yield was also reflected by the Iraq 5.8% notes due 2028, which have traded up to 93 bid, 94 offered, for a yield of 7.2% bid, 7% offered, which is higher on the week, Pham wrote in a note published Wednesday.

Citigroup, Deutsche Bank and JPMorgan are the joint bookrunners of the Iraq issue, with Trade Bank of Iraq acting as a co-manager.

The $1 billion of 6.752% 5½-year notes (expected rating: /B-/B-) came at par. They were talked at a yield of 6¾% after being revised down from the 7% area.

Colombia sells add on

Colombia priced its add on offering at Treasuries over 155 bps, which was the level at which they launched and represented a small concession of about 7 bps.

The sovereign priced $1.4 billion of the 3 7/8% global bonds due 2027 at 100.456 to yield 3.816%.

The original notes, which priced in January, came at 98.596 to yield 4.042%, or Treasuries plus 160 bps.

Proceeds of the new notes will be used for general budgetary purposes.

The size of this deal now stands at $2.4 billion.

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