EM debt unchanged on Tuesday, softer on the week; Chile roadshows local currency deal

By Paul A. Harris

Portland, Ore., June 26 – Emerging markets debt was essentially flat on mixed trading Tuesday, sources said.

Russian sovereign debt moved very little on the day, a trader said.

The Brazil 7 1/8% global bonds due January 2037 were at 104 3/8 bid on Tuesday, unchanged but

down 1/8 point to ¼ point on the week.

Petrobras’ 6¾% global bonds due January 2041 were unchanged on the day but slightly better on the week at 89¼ bid, up 1/8 point on the week.

EM bonds appear to have oversold amid the volatility that has lately seized the global capital markets and may be as much as 25 basis points tighter on the week, according to a trader based in the United States.

However any potential rally in Latin American debt is being forestalled by upcoming high-profile political elections including presidential and legislative elections in Mexico, set for July 1, and presidential and legislative elections in Brazil, set for later in the year, the trader said.

Frontera maintains premium

Amid a paucity of recent deals, dollar-denominated bonds sold last week by Frontera Energy Corp. continue to be marked at a premium to their new issue price, the trader said.

Frontera Energy’s 9.7% notes due June 2023 were at 99.42 bid, 99.7 offered on Tuesday, although trading activity has been negligible to non-existent.

The $350 million issue priced at 98.842 to yield 10% on June 22.

The deal appeared to come cheap, the trader said, adding that the concession to existing bonds was anywhere from 100 to 200 basis points.

The oil and gas producer, which is focused on Colombia, has its headquarters in Toronto, which may have generated a smattering of interest among high-yield investors.

However the audience for the deal was primarily comprised of emerging markets accounts.

Chile’s local currency deal

Few issuers appear inclined to brave the ongoing capital markets volatility.

One exception is Chile, which is roadshowing a Rule 144A and Regulation S local currency deal.

Banco Itau, HSBC and Scotia are the leads.

The deal could generate interest among global bond investors but could just as easily end up being driven by local investors, the trader said.

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