China Construction Bank sells notes; Russian, Lat-Am bonds tighten; Naspers gets downgraded

By Christine Van Dusen

Atlanta, Aug. 13 – China Construction Bank (Asia) Corp. Ltd. sold new notes during a risk-on Wednesday that saw Russian notes tighten as investors awaited news on the truck convoy traveling to Ukraine.

The fleet of 280 military vehicles is said to be carrying foreign aid, but Ukrainian officials have their doubts, given that the Red Cross has not been consulted or involved.

“All focus remains on the Russian aid convoy and how Ukraine will react when it reaches the border [this week]. Ukraine has been quite clear that they want the aid unloaded at the border,” a London-based analyst said. “Overall, tensions and suspicions remain ever-present, but the market does appear to be focusing on the positive headlines and potential for a deal on the aid.”

Indeed, credit default swap spreads for Russia tightened by 6 basis points while Russian banks saw their bonds narrow by between 10 bps and 15 bps, the analyst said.

“Russian corporates are also better,” he said, pointing to the 10-bps tightening by OAO Rosneft. “Elsewhere, Turkey sovereign cash is circa 5 bps tighter, helped by the generally better tone.”

From the Middle East, flows were steady and active on Wednesday, a London-based trader said.

Bahrain bonds were particularly popular, with a good amount of the sovereign’s 2020s trading between 108¾ and 109.

“I traded two-way on the 2022s within 112 to 112¼,” he said.

Perpetual notes from the region were mixed, with sellers of Dubai Islamic Bank and buyers of Abu Dhabi Islamic Bank bonds. And DPWorld’s notes were popular, improving by 5 bps.

“Impressive day, especially given that we are in mid-August,” he said. “In the region, there is good demand as investors return from holidays.”

China Construction does deal

In its new deal, China Construction Bank priced $5 billion 4¼% notes due Aug. 20, 2024 at 99.577 to yield 4.345%, or Treasuries plus 275 bps, a market source said.

CCB International, Citigroup and HSBC were the bookrunners for the Regulation S issue of notes.

The bank is based in Beijing.

Naspers gets downgrade

In other news from emerging markets on Wednesday, South African mass media company Naspers Ltd. was downgraded from BBB- to BB+ by Fitch Ratings.

Naspers was cut to junk because of the company has made larger-than-expected investments in global e-commerce and sub-Saharan pay-television opportunities, the ratings agency said in its report.

“Bonds are 25 bps to 35 bps wider this morning,” a trader said.

By midday in New York, Naspers’ 2017 notes were trading at 109½ bid, 110.40 offered.

“That’s only 12 bps wider on the week,” he said.

Lat-Am sovereigns tighten

From Latin America, flows were solid and inquiries were balanced as spreads for low-beta sovereigns tightened between 4 bps and 5 bps, a New York-based trader said.

And the tone was positive for high-grade names, in light of the rally in equities.

Even Venezuela was able to recover some of the losses suffered in recent days, though Argentina continued to struggle, he said.

The latter sovereign’s Bonar 2024s were trading early Wednesday at about 89½ from 90¾ on Tuesday.

Brazil dips, then rebounds

Later in the day, Latin American sovereign bonds performed strongly and narrowed 8 bps, the New York trader said.

Venezuela’s bonds finished the session slightly higher or unchanged with light flows, he said.

Only Brazil saw a slight dip after it was reported that a presidential candidate had died in a plane crash, and those losses were recovered quickly.

Votorantim, Petrobras improve

Though many corporate bonds from Latin America were quiet on Wednesday, some names improved in trading, another New York-based trader said.

Brazil’s Votorantim SA, for one, saw solid gains and very little selling and Petroleo Brasiliero SA (Petrobras) saw its bonds tighten between 4 bps and 8 bps, he said.

Chile’s Masisa SA moved higher, though not as high as the trader had expected.

And buyers emerged for Mexico’s Cemex SAB de CV, he said.

© 2015 Prospect News.
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