CEEMEA region eyes two deals so far this week; Chile’s Falabella prices; EM spreads stable

By Rebecca Melvin

New York, Oct. 23 – Central & Eastern Europe, Middle East and Africa region market players on Monday were eyeing two deals on the calendar, including Abu Dhabi Crude Oil Pipeline LLC’s $3 billion of notes and Arab Petroleum Investments Corp.’s planned five-year dollar sukuk.

Both deals are on roadshows, with the earliest pricing of the Abu Dhabi notes seen Tuesday or Wednesday or even next week, a London-based source said.

In the Latin America region, Chile’s SACI Falabella priced $400 million of 10-year notes on Monday afternoon with a 3¾% coupon and reoffered at 98.972 to yield 3 7/8% or a yield spread of 150 basis points over U.S. Treasuries.

Pricing came at the tight end of guidance following a three-day roadshow that concluded on Friday. HSBC, JPMorgan and Santander were joint bookrunners of the Rule 144A and Regulation S notes.

Elsewhere, emerging markets were fairly quiet, while spreads remained broadly steady.

Central bank policy developments are in view, including U.S. president Donald Trump’s pick to be the new chair and vice chair of the Federal Reserve. That decision could be announced this week, but more likely next week.

In addition, the next meeting of the European Central Bank is scheduled for Thursday, in which the bank may decide to reduce QE bond buying but also lengthen the program by six to nine months, and with many expecting that it will commit to lower rates for longer.

“Trump coming up with proposed chair and vice chair is the bigger driver for dollar rates and therefore is the bigger factor for EM,” the source said.

U.S. Treasury rates, which jumped on Friday, came back in somewhat with the yield on the benchmark 10-year U.S. Treasury down to 2.368%, compared to 2.383% late Friday.

Trump has met with all five Fed chair candidates, but there were rumors that current Federal Reserve governor Jerome Powell will be Trump’s choice and that Powell is unlikely to shift policy significantly away from the current course of Fed chair Janet Yellen.

Yellen is viewed as the most dovish of the five candidates in the running, but Powell is viewed as closest to her in regard to monetary policy, according to reports.

Former Fed governor Kevin Warsh and Stanford University economist John Taylor are the most hawkish choices, and White House economic advisor Gary Cohn is a fifth candidate but seen as unlikely to make the final cut.

For now, the Fed is forecasting three interest rate hikes next year, and Yellen is expected to raise rates one more time in December before either she is re-nominated or a successor takes the helm.

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