Primary sees Poland, Croatia deals; rally fades, trading mixed for EM; Mexico, TSKB ahead

By Christine Van Dusen

Atlanta, March 16 – Poland and Croatia issued notes on a Thursday that saw the previous day’s rally in emerging markets assets – related to the Federal Reserve’s announcement of an expected rate hike – carry over into the morning before giving way to some weakness in the afternoon.

Also impacting the picture on Thursday were the Dutch election results, which dealt a loss to the anti-immigration party and were seen as a bellwether for what could happen elsewhere in Europe.

“It remains to be seen whether the Netherlands, European Union and Turkey are choosing a more conciliatory approach with the Dutch elections now behind. Recent comments by Turkish politicians point to a further escalation,” a London-based analyst said.

According to some government officials, the Turkish government could cancel the migrant readmission agreement and is also assessing the cancellation of the refugee deal, alleging that the European Union has not fulfilled its side of the deal.

“This follows comments by president Erdogan, who said in an interview that Turkey must reassess its relationship with the bloc,” he said.

Overall, the secondary market for emerging markets assets was more mixed during the afternoon, “with dealers happy to sell into what remaining strength there was following the late-morning rally fade,” a trader said. “We saw a pick up in buying from European and Middle Eastern clients as U.S. Treasury yields move wider again.”

Spreads closed at a slightly weaker 2 bps to 4 bps tighter, he said.

“Well off the euphoria of the morning,” he said.

In deal-related news on Thursday, Mexico advanced a new deal, Russia’s Gazprom OJSC set talk and Turkey’s Turkiye Sinai Kalkinma Bankasi AS (TSKB) planned a roadshow.

Asia in focus

In trading from Asia, most of the activity on Thursday was Street driven, “with investors happy to watch how things settle,” another trader said.

Flows for names from China were “tepid” for most of the day, he said.

“Indian and Malay names were well bid while there was also some demand for the Korean 10-year,” he said. “The shorter end of China, India, Hong Kong and Malaysia was better-offered there as smaller size tickets steadily came out from clients all day.”

Financials tighten, Philippines climbs

Among investment-grade names in Asia, financials moved 5 bps to 8 bps tighter, another trader said.

“However, demand on the client front was not as supportive, with yield buyers sidelined and we are closing the day 1 bp to 3 bps tighter,” he said.

The long end for Philippines opened 2 points higher and closed up 1½ points, about 5 bps to 6 bps tighter on spread, he said.

Poland prints two tranches

In its new deal, Poland priced €1.5 billion in a two-tranche issue that included €1 billion of 1 3/8% notes due October 22, 2027 and a €500 million tap of the 2 3/8% notes due Jan. 18, 2036, a syndicate source said.

The 2027 notes priced at 99.068 to yield mid-swaps plus 60 basis points. The notes were talked in the 60 bps area.

The tap priced at 102.701 to yield mid-swaps plus 83 bps. The notes were talked at a spread of 90 bps to 95 bps. In April the sovereign priced €750 million of the notes at mid-swaps plus 125 basis points.

Barclays, BNP Paribas, Commerzbank, ING, JPMorgan and PKO Bank Polski were the bookrunners for the Regulation S deal.

Issuance from Croatia

Croatia priced €1.25 billion of 3% notes due March 20, 2027 at 98.32 to yield 3.199%, according to an announcement from the sovereign.

Citigroup, HSBC, Morgan Stanley and Zagrebacka Banka were the bookrunners for the deal.

The proceeds will be used for general governmental purposes.

TSKB sets roadshow

Turkey’s TSKB will soon set out on a roadshow for up to $300 million in 10-year green bonds, a market source said.

The notes are non-callable for five years.

Other details were not immediately available on Thursday.

The lender is based in Istanbul.

Gazprom gives guidance

Russia’s Gazprom set initial talk in the 5¼% area for a benchmark-sized issue of dollar-denominated loan participation notes due in 10 years (Ba1//BBB-), a market source said.

Gazprombank, JPMorgan, Mizuho Securities and SMBC Nikko are the bookrunners for the Rule 144A and Regulation S deal.

The notes will be issued via Gaz Capital SA.

Gazprom is a Moscow-based natural gas producer.

Mexico plans deal

Mexico is planning to issue dollar-denominated global notes due in March 2027, according to a filing from the sovereign.

Barclays, Deutsche Bank and JPMorgan are the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for refinancing, repurchasing or retiring of debt; redeeming its outstanding 5.95% notes due March 2019; and for general governmental purposes.

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