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Morning Commentary: EM gains as investors digest Brexit vote result; Ooredoo trades higher
By Christine Van Dusen
Atlanta, June 28 – Even as investors continued trying to make sense of the United Kingdom’s decision to leave the European Union – and the U.K.’s sovereign ratings were downgraded – emerging markets bonds steadied and equity markets opened stronger on Tuesday.
S&P dropped the United Kingdom’s rating to AA from AAA and Fitch knocked it to AA from AA+.
“The two rating agencies and Moody’s have also assigned a negative outlook going forward,” a London-based strategist said. “Market reaction has however been muted, given the heavy reactions on Friday and yesterday.”
Also impacting the picture: U.S. rates stabilized overnight and crude oil prices ticked up, he said.
“Turkey sovereign credit default swaps trade at 257 basis points, circa 5 bps tighter, while cash is around 1 bp to 3 bps tighter,” he said.
The markets were expected to turn their focus to the meeting of E.U. leaders.
Investors were also keeping an eye on the Central Bank of Egypt, which is reportedly in talks with the International Monetary Fund for a loan of up to $7 billion.
“Both sides have denied that any formal request had been made,” the strategist said. “Egypt is looking also to issue $3 billion in eurobonds in September or October to finance its budget deficit, which is expected to reach $10 billion.”
Also from Africa, Ghana was said to be considering an issue of $1 billion in bonds “if borrowing rates are attractive,” a trader said. “Kenya might issue a eurobond in the financial year starting on July 1 and expects that it could achieve cheaper borrowing rates than other African economies.”
In trading on Tuesday morning, spreads tightened for Middle Eastern bonds, another trader said.
The new issue of notes from Qatar’s Ooredoo QSC – 3¾% notes due 2026 that priced at 98.964 to yield mid-swaps plus 240 bps – traded Tuesday at 99.80 bid, 100.10 offered, a trader said.
HSBC was the global coordinator, and ANZ, BofA Merrill Lynch, Citigroup, DBS Bank, HSBC, Mizuho Securities, MUFG and QNB Capital were the joint lead managers and joint bookrunners for the Rule 144A and Regulation S deal.
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