Turkey widens; Brazil liquidity ‘deteriorating’; Albaraka advances deal; Alfa Bank eyes notes

By Christine Van Dusen

Atlanta, Nov. 18 – Emerging markets assets opened slightly softer on Wednesday morning as rates rallied and risk premiums tightened ahead of the release of October’s minutes from the Federal Open Market Committee, which later in the day showed that a December rate hike remains likely.

“In a partial reversal of yesterday’s moves, European equities and major bond yields are generally lower while European currencies have appreciated against the dollar,” according to a report from Barclays Capital.

In trading, oil-related credits were firm, “but it feels like we are becoming immune to low oil prices and need a downdraft for oil-related credit spreads to be pushed wider,” a London-based trader said.

Notes from Turkey opened a few basis points wider after narrowing on Tuesday, he said.

“Turkey banks are trading better as valuations widened out to more attractive levels versus the sovereign,” he said. “Corporates are also very sticky and difficult to source in places, but there is good flow in telecommunications.”

Looking to Latin America, Brazil’s congress upheld eight of 13 presidential vetoes, including a salary increase for judicial workers and tax breaks for teachers, which “would have put a serious dent on the federal accounts,” a New York-based trader said.

Meanwhile, October tax collections were disappointing, according to new data, which “underlines the fact that Brazil’s fiscal accounts will continue to remain under severe pressure,” he said.

“On a separate note, the market continues to struggle with the deteriorating liquidity situation,” he said. “Dealers are extremely reluctant to have any position in the long end of the curves, which results in very high spread volatility.”

Lat-Am in focus

Many Brazilian names were very well bid or saw few if any offers, he said, and curves are steepening and widening “in wild swings.”

Bonds from Petroleo Brasileiro SA were “mostly treading water” after the previous day’s gains, another New York trader said.

Banks from Colombia were slightly weaker, he said.

Corporates from Latin America saw decent liquidity on Wednesday, he said, and continued their “slow grind lower, with clients better sellers.”

And Mexico-based Cemex SAB de CV’s bonds moved lower and the curve was better-offered, he said.

“Looks to be industry-related,” he said. “Global infrastructure projects seem to be progressing.”

Albaraka whispers guidance

Turkey’s Albaraka Turk Katilim Bankasi AS whispered its dollar-denominated sukuk at 10%, a market source said.

Standard Chartered Bank, Barwa Bank, Dubai Islamic Bank, Emirates NBD Capital, Nomura International, Noor Bank and QInvest are the bookrunners for the Regulation S deal.

Other details were not immediately available on Wednesday.

The issuer is an Istanbul-based lender.

Alfa plans issuance

Russia’s OJSC Alfa Bank is looking to issue dollar-denominated notes due in November of 2018, according to a company announcement.

UBS is the central coordinator for the Regulation S deal. Alfa Bank and Barclays are also leading the transaction.

Alfa Bank is a commercial lender based in Moscow.

Bahrain draws orders

The new notes from Bahrain – a two-tranche issue of $1.5 billion notes due 2021 and 2026 – drew a final order book of about $2 billion, a market source said.

The $700 million 5 7/8% notes due 2021 priced at par to yield 5 7/8%, following talk in the high-5% area.

The $800 million 7% notes due 2026 priced at par to yield 7%, following talk in the 7% area.

Bank ABC, BNP Paribas, Citigroup, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

On Wednesday, the 2021s were spotted trading at reoffer while the 2026s were seen at 99 5/8, a trader said.

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