EM weakness with broader markets; Lat-Am notes struggle; Abu Dhabi spreads widen; deals ahead

By Christine Van Dusen

Atlanta, May 3 – Spreads for many emerging markets bonds widened on Tuesday alongside the larger market’s weakness, which stemmed from concern about economic conditions in China and Europe.

“The broader markets are struggling with stocks,” a London-based trader said. “Spreads are closing out wider without huge volumes.”

Some weakness crept into Latin American credit on Tuesday, “pushing some credits more than just a little bit lower,” a New York-based trader said.

Among those credits was Brazil-based Vale SA, which ended its run and moved 3 points lower from Friday afternoon on oil weakness, among other things, he said.

“No strong selling of note from the institutional constituent, but it’s certainly helping to pull other Brazil credits lower, as is the general weaker market tone globally,” he said.

Most banks from Colombia were weaker on Tuesday while Mexico’s bonds were mostly quiet, he said.

“Bank paper remains quite range-bound, as it has been,” he said. “Clients are no longer cherry-picking for paper, as valuations have become challenging. But some paper is still difficult to source.”

Notes from Mexico-based Cemex SAB de CV continued to trade strongly.

“Today’s overall weaker tone has put only a slight kink in its performance,” he said. “The 2026s continue to trade very well, but are a touch lower.”

Overall, emerging markets credit is expected to improve, a London-based strategist said.

“We expect EM credit and FX to benefit from the benign macro environment, supported by accommodative central bank policies, oil prices above $45 per barrel, and solid global data,” a London-based strategist said. “Looking ahead, U.S. nonfarm payrolls on Friday will be the highlight of this week.”

Lat-Am in focus

At the end of the session, Brazil’s five-year credit default swaps spreads had moved to 345 basis points from 336 bps, a trader said.

Mexico’s, meanwhile, traded at 167 bps from 160 bps after moving as wide as 171 bps.

“Cash prices initially dropped on spread widening but did crawl back as U.S. Treasury strength contributed to a bit of a bounce,” he said. “Lat-Am high yield finishes lower on the day, with Venezuela hit on oil weakness.”

Indeed, the sovereign’s 2027s dipped to 41.25 from 42.35, while PDVSA’s 2017s moved to 57.25 from 58.75.

Argentina’s 2026s closed at 101.10 from 101.70.

“Flows picked up from a quiet Monday yesterday, with two-way inquiries,” he said.

Mozambique loses aid

Some investors were keeping an eye on Mozambique, following the International Monetary Fund’s discovery of “undisclosed loans above $1 billion for security equipment,” the strategist said.

This has led the fund, as well as the World Bank and the United Kingdom, to halt financial aid to the sovereign, he said.

“On Friday, Fitch downgraded Mozambique to CCC, given that the commercial nature of the loans will affect debt projections negatively,” he said. “Moreover, the country’s external position has deteriorated further while the lack of transparency is worsening the relationship with its donors.”

Abu Dhabi moves wider

Looking to the Middle East, the recent 2021 and 2026 bonds from Abu Dhabi moved about 3 bps wider on Tuesday, a trader said.

“They will snap back, in spread terms, nicely when and if rates back up,” he said.

Bonds from Bahrain “held in well,” he said, with the 2020s and 2021s outperforming.

“They are near 40 bps tighter on the month, with steepening occurring on their curve,” he said. “Still plenty of very technical bonds out there with the Street caught short and no free-float to be seen.”

Mubadala on deck

On the horizon is the new issue from Abu Dhabi-based holding company Mubadala Development Co. PJSC, which on Tuesday set out for a roadshow to market dollar bonds.

BofA Merrill Lynch, BNP Paribas, First Gulf Bank, JPMorgan, MUFG Securities and Societe Generale CIB are the bookrunners for the Rule 144A and Regulation S deal.

“Mubadala is on the road now and will likely look to issue early next week,” he said.

Black Sea sees action

The new issue of notes from Greece’s Black Sea Trade and Development Bank was fairly active in trading on Tuesday morning, a trader said.

The $500 million issue of 4 7/8% notes due May 6, 2021 priced last week at 99.27 to yield Treasuries plus 375 bps.

The notes were seen in the morning at 101.28 bid, 101.98 offered, then moved to 101.26 bid, 101.74 offered.

JPMorgan and HSBC were the bookrunners for the Rule 144A and Regulation S deal.

“On the face of it, this well-capitalized bank still looks cheap,” the trader said.

Dominicana gives guidance

Dominican Republic-focused AES Andres Dominicana SPV set talk in the low-to-mid-8% area for a dollar-denominated issue of notes due in 10 years, a market source said.

Citigroup and Credit Suisse are the bookrunners for the Rule 144A and Regulation S deal.

Andres Dominicana is a special purpose vehicle for Virginia-based AES, a private power generator in the Dominican Republic.

Tocumen airport sets talk

Panama’s Aeropuerto Internacional de Tocumen SA (Tocumen International Airport) set talk in the 5½% area for a dollar-denominated issue of notes due in May of 2036, a market source said.

Citigroup is the bookrunner for the Rule 144A and Regulation S deal.

The proceeds will be used for capital expenditures.

The airport is located in Panama City.

Ezdan plans roadshow

Qatar-based real estate developer Ezdan Holding Group has mandated banks to lead its $2 billion sukuk program, a market source said.

HSBC and Mashreq are the joint global coordinators. Barwa Bank, Emirates NBD Capital, HSBC and Mashreq are the lead managers and bookrunners for the issue.

A roadshow will begin on Thursday and take place in Asia, the United Arab Emirates and Britain.

CAF to issue dollar notes

Venezuela’s Corporacion Andina de Fomento (CAF) is looking to issue dollar-denominated notes, according to a company filing.

BofA Merrill Lynch, Citigroup and HSBC are the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general corporate purposes, including funding lending operations.

CAF is a lender based in Caracas, Venezuela.

Slovenia seeks euro issuance

Slovenia is planning to issue euro-denominated notes alongside a tender offer, according to a filing from the sovereign.

The sovereign is conducting a tender offer for each of its $2.25 billion 5½% notes due 2022, $2.5 billion 5.85% notes due 2023 and $2 billion 5¼% notes due 2024.

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