Solid day for EM; Russia, Ukraine underperform; Lat-Am prices rise; Bahrain picks banks

By Christine Van Dusen

Atlanta, Aug. 15 – Emerging markets assets remained mostly solid on Monday, with bids for Latin American bonds tied to Treasury weakness, as investors eyed the tension between Russia and Ukraine.

Risky assets on Monday were “on a solid footing, as the search for yield and an otherwise benevolent environment overshadow geopolitical and political risks,” a London-based analyst said.

But Russia and Ukraine saw their bonds underperform as tensions continued, with Russia accusing Ukraine of engaging in terror activity after the deaths of two Russian servicemen.

“With Putin having warned of a ‘very serious’ response, Ukraine has reported a repositioning of Russian troops along the border,” he said.

Other world leaders are urging the two nations to contain the crisis.

“Putin may cut diplomatic ties with Ukraine if there’s no other option left,” according to a report from Schildershoven Finance BV.

In response, Russia’s five-year credit default swaps spreads were better-offered on Monday morning, following a strong bid into the weekend, a trader said.

From Latin America, volumes were low on Monday and the market continued to trade well, a New York-based trader said.

Brazil’s five-year credit default swaps spreads closed at 253 basis points from 258 bps, while Mexico’s ended at 134 bps from 136 bps.

“Cash prices remain well-bid despite Treasury weakness, but bids did start to get hit later in the day as Treasuries hit intraday lows,” he said. “Lat-Am high-yield finishes higher on the day, with both Venezuela and Argentina higher.”

Venezuela’s 2027s closed Monday at 47 from 46.65, PDVSA’s 2017s closed at 73.50 from 72.50, and Argentina’s Bonar 2024s were up at 118.40 from 118. The latter sovereign’s 2026s ended the day at 112.60 from 111.75.

“Flows very light to kick off the week, with only scrappy two-way throughout the session,” he said.

Turkey quiet

Looking to Turkey, trading was quiet at the open on Monday, apart from a few trades in the sovereign’s 2045s, 2036s and 2040s, he said.

All were 1 bp tighter or unchanged, he said.

“Turkey banks saw small two-way with retail, who seem to be better buyers at the moment,” he said. “Corporates continue to trade well, with most trading at pre-coup tights to the sovereign.”

Azerbaijan faces challenges

Investors were also keeping an eye on Azerbaijan, which is experiencing economic difficulties as a result of the oil-price environment.

“The economic situation in Azerbaijan remains quite difficult, as oil still trades at relatively low levels,” Schildershoven said. “Economic data may negatively affect the sovereign and corporate bonds.”

Aircraft company sets talk

China Aircraft Leasing Group Holdings Ltd. set talk in the 5¼% area for a dollar-denominated issue of notes due Aug. 22, 2021, a market source said.

China Everbright Bank and DBS Bank are bookrunners for the Regulation S notes, which will be issued via wholly owned subsidiary CALC Bond 2 Ltd.

The aircraft leasing company is based in Hong Kong.

Bahrain picks banks

Bahrain has mandated Bank ABC, BNP Paribas, Credit Suisse, JPMorgan and Standard Chartered Bank as bookrunners for an upcoming issue of eurobonds, a market source said.

The deal is expected to be benchmark-sized.

Other details were not immediately available on Monday.

New deal from HNA

Last week, China’s HNA Group Co. Ltd. priced $300 million 6% notes due Aug. 18, 2019 at par to yield 6%, a market source said.

Other details were not immediately available on Monday.

The issuer is a Haikou City, China-based business conglomerate that focuses on airport services, air transportation, real estate, hotel and catering, travel services, commercial retail, logistics and transportation, financial services and network information technology businesses.

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