Emerging markets firmer; new Codelco tranches tighten; Promsvyazbank, PTTEP price deals

By Rebecca Melvin

New York, July 26 – Emerging markets were firmer on Wednesday as buyers stepped back into the market ahead of news on the latest rate-setting decision by the U.S. Federal Reserve and following some selling into Fed decision day on Tuesday, a market source said.

“It’s constructive,” the source said of market tone on Wednesday. “There was a little bit of selling yesterday, as it seems the market got a little bit ahead of itself, but we’ve seen buyers of EM throughout the day today,” the source said.

Corporacion Nacional del Cobre de Chile (Codelco)’s new tranches improved in first-day trading after the Santiago-based state-owned copper mining company priced $2.75 billion of the senior notes at yields that were tighter than initial talk, sources said.

Codelco’s new 4½% notes due 2047, of which $1.25 billion were priced on Tuesday, were quoted at a spread of Treasuries plus 167 basis points bid, Treasuries plus 164 bps offered, compared to the initial price of Treasuries plus 175 bps.

The Codelco 3 5/8% notes due 2027, of which $1.5 billion were priced, were quoted at 146 bps bid, 143 bps offered, compared to initial pricing at Treasuries plus 150 bps.

There is a concurrent tender for several series of Codelco bonds that runs until July 31. “Depending on how many bonds get tendered, you could see this bond perform even better,” a source said of the new deal.

A successful tender will mean better free cash flow and leverage levels for the company as well as more buying power behind investors interested in this name, and fewer old bonds available to buy, the source commented.

Also in primary action, Russia’s Promsvyazbank priced €500 million perpetual notes at par to yield 8¾%, or mid-swaps plus 680.7 bps, and Thailand’s PTTEP Treasury Center Co. Ltd., a subsidiary of PTT Exploration & Production PCL, priced $354 million of perpetual notes at par, sources said.

There were also a number of local-currency deals in Asia including Rs. 10 billion of debentures priced by India’s Tata Motors Ltd. and Rs. 4.5 billion of debentures priced by Syndicate Bank.

In markets overall, all eyes were on the U.S. central bank, which left its current Fed funds rate unchanged at 1% to 1¼% but said that it expects to begin implementing balance sheet normalization “relatively soon” if the economy continues to evolve as anticipated, according to the Federal Open Market Committee’s release on Wednesday afternoon following a two-day policy meeting.

In Latin America, emerging market debt players awaited news on sanctions that the United States was expected to impose on 13 individuals linked to Venezuela’s ruling Socialist Party and President Nicolas Maduro, who are accused on human rights abuses and undermining democracy.

First on a list of 10 individuals drawn up by U.S. Senators Marco Rubio (R-FL) and Bob Menendez (D-NJ) was Tibisay Lucena Ramirez, president of the National Electoral Council. Also among the individuals listed were top members of the Venezuelan army, National Guard and National Police, National Treasurer Carlos Erick Malpica Flores, and the finance chief of Petroleos de Venezuela.

In a letter to President Trump dated July 25, Rubio and Menendez urged the administration to sanction individuals in the Maduro regime responsible for human rights abuses.

The letter cited the Pharmaceutical Federation of Venezuela, which has reported more than 85% of medicinal drugs are either unavailable of difficult to find in Venezuela, and among the tragedies that the nation has endured were 17 infant deaths hospitals reported related to an infestation of possum that staff were unable to combat without cleaning supplies or funds to hire an exterminator.

In focus is what the Senators referred to as a “fraudulent July 30 vote to rewrite the Venezuelan constitution.” If Maduro proceeds with this plan, the United States has promised swift and forceful sanctions, which could include sanctions of imports of Venezuelan oil.

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