Some EM bonds outperform after Fed news; MAF, Sri Lanka issues see action; Lebanon on deck

By Christine Van Dusen

Atlanta, Oct. 29 – China General Nuclear Power Corp. sold notes on Thursday as some emerging markets assets opened softer while others outperformed after the Federal Reserve indicated it could raise rates in December.

“The rhetoric from the Fed was hawkish, and given we went from an almost 0% chance of a rate raise in December to 50% you would think EM credit has to also re-price,” a trader said.

Selling of EM bonds was “orderly” on Thursday, morning, another trader said. “I think this could just be the month-end effect. October has been a decent month, turning those September losses into modest gains for most.”

Sovereign bonds from Turkey were under pressure amid some selling, he said, with real-money buying evaporating.

“Credit default swaps are bid at 253 basis points, a good 5 bps wider from the close,” he said. “The 2025s are underperforming, as the Street owns it and we saw a few hits in the Street.”

Small selling of corporate bonds from Turkey was seen, he said.

Latin American bonds were mixed, a New York-based trader said.

“Nervousness about U.S. rates creeps in, pulling bids on some high grade credits back, while others – Chile high grade –seem to have a nice ‘force field’ around them,” he said. “Still seeing overall better buying.”

Banks from Colombia were quiet, he said, and bank paper from Mexico remained well-bid.

“No profit-taking seen there,” he said.

Five-year credit default swaps spreads for Brazil closed Thursday at 442 bps from 448 bps, while Mexico’s moved to 150.50 bps from 148 bps, another trader said.

“Argentina closes mostly unchanged,” he said.

MAF notes trade

The new issue of notes from Dubai’s Majid Al Futtaim Holding LLC – $500 million 4½% notes due in 2025 that priced Tuesday at 99.841 to yield 4.52%, or mid-swaps plus 255 bps – traded Thursday morning at 99.80 bid, par offered.

On Wednesday the notes were seen at par bid, 100.15 offered.

Abu Dhabi Islamic Bank, Dubai Islamic Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered were the bookrunners for the Regulation S issue of Islamic bonds.

The proceeds will be used for general corporate purposes.

Sri Lanka dips

In other trading, Sri Lanka’s new $1.5 billion 6.85% notes due in 2025 that came to the market Tuesday at par were seen at 99 3/8 bid, 99 5/8 offered on Thursday morning after trading down a point on Wednesday.

Citigroup, Deutsche Bank, HSBC and Standard Chartered were the bookrunners for the Rule 144A and Regulation S deal.

Peru bonds rise

Peru’s new €1 billion issue of 2¾% notes due 2026 that priced at 99.998 to yield mid-swaps plus 190 bps traded Thursday at 100.10 bid, 100.20 offered, a trader said.

BBVA, BNP Paribas and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general governmental purposes, including financial investment and refinancing, repurchasing or retiring its domestic and external indebtedness, according to a filing from the sovereign.

Gerdau releases results

Also on Thursday, Brazil-based Gerdau SA posted its third-quarter earnings results, which were strong after adjusting for a $400 million write-down, a trader said.

“The weaker real is impacting top line, but margins are stable and debt service coverage and net leverage are comfortable,” he said. “No trades so far, but retail and small real-money buying, in spite of the wider Brazil sovereign, suggest prices could move higher this morning.”

IMF could change policy

Looking to Ukraine, bonds have maintained a “decent tone” as the International Monetary Fund planned to adjust its lending program for the sovereign, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

The IMF is looking to change its policy, which prohibits lending to countries that are in arrears to others, given that Ukraine looks close to defaulting on about $25 billion it owes to Russia.

“The move reportedly does not require a supermajority vote and is expected to be considered in late November,” he said.

Chinese corporate prints notes

In its new deal, China General Nuclear Power priced $500 million 4% notes due Nov. 5, 2025 at 99.235 to yield 4.094%, or Treasuries plus 197.5 bps, a market source said.

HSBC, ICBC, JPMorgan, Bank of China, Agricultural Bank of China, Morgan Stanley and Societe Generale CIB were the bookrunners for the Regulation S deal.

The proceeds will be used to finance the development of and investment in domestic and overseas projects, as well as for general corporate purposes.

The nuclear power plant company is based in Shenzhen, China.

Nafin launches bonds

Mexico’s Nacional Financiera, SNC, Institucion de Banca de Desarrollo SNC (Nafin) launched a $500 million issue of five-year green bonds at Treasuries plus 190 bps, a market source said.

BofA Merrill Lynch, Credit Agricole CIB and Daiwa Capital Markets are the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to fund and finance eligible green projects.

The issuer is a Mexico City-based development bank.

Lebanon gives guidance

Lebanon set talk for a two-tranche issue of dollar-denominated notes due in November of 2024 and 2028, a market source said.

The notes due in nine years were talked at 6.2% to 6.35%.

The 13-year notes were talked at 6.6% to 6¾%.

Citigroup, Fransabank, Societe Generale de Banque au Liban and Standard Chartered Bank are the bookrunners for the Regulation S deal, which is expected to price on Friday.

Shandong Gold sets roadshow

China-based metals and mining company Shandong Gold Group Co. Ltd. will set out on Friday for a roadshow to market a dollar-denominated issue of notes, a market source said.

Bank of China, Bank of China (Hong Kong), BOC International and ABC International are the joint bookrunners for the Regulation S deal.

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