Nigeria tightens talk on eurobond issue; South Africa bonds better; Latin America quiet

By Rebecca Melvin

New York, Feb. 15 – Nigeria was able to tighten pricing on its dual-tranche notes offering on Thursday and plenty of demand was seen as the combined order book for the 12-year and 20-year paper was in excess of $6.25 billion. Pricing was expected to be fixed on Thursday, but no final terms were heard by Prospect News’ deadline.

Pricing on the 12-year tranche was tightened to a yield of U.S. Treasuries plus 437.5 basis points from Treasuries plus 450 bps initially, and pricing of the 20-year tranche was tightened from a yield of Treasuries plus 475 bps from Treasuries plus 487.5 bps initially.

S&P said it assigned the new Nigeria eurobond issue single B. Earlier in the week S&P assigned the proposed U.S.-dollar eurobond to be issued by Kenya a B+ rating. Meanwhile, Moody’s Investors Service cut its credit rating on Kenya on Tuesday to B2 from B1 citing deteriorating fiscal metrics, worsening debt affordability and rising debt levels. Kenya is roadshowing notes with 10-year and 30-year maturities through Monday via bookrunners Citigroup, JPMorgan, Standard Bank and Standard Chartered.

Elsewhere in Africa, South Africa bonds got a boost after news late Wednesday that President Jacob Zuma is stepping down immediately after his party the African National Congress voted to remove him. The markets liked the news expecting that Zuma’s successor will implement government reforms.

South Africa’s sovereign debt rose, sending the yield on its 10-year benchmark down by about 10 bps and recently standing at 5.101%.

The expectation is that Zuma will be replaced by his deputy Cyril Ramaphosa, a pro-business, anti-corruption leader that supports neutralizing Zuma’s patronage network.

The market has been anticipating Zuma’s resignation, with the South African rand currency rising to multi-year highs against the U.S. dollar in recent weeks.

Latin America’s dollar bond market was quiet again on Thursday as it looks to cap off a quiet week. The only deals getting done were local currency ones.

“If you are looking to issue in dollars it’s not an ideal time, but that doesn’t keep issuers needing local currency deals from moving ahead,” a New York-based market source said.

The source said that those looking at the dollar market are “holding off” right now.

In the secondary market, things were setting down on Thursday with the yield on the U.S. 10-year Treasury notes settling the day about unchanged at 2.901%, following intraday swings, but swings that were not as strong or swift as Wednesday’s sharp move up on yields.

“Things are settling down a bit but not a lot. The market still has to adjust, but there was a little less edge [today],” a source said.

On Wednesday U.S. Treasuries weakened, sending the yield on the 10-year benchmark up 10 bps to about 2.90% from 2.80%.

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