EM debt trades mixed; Apicorp launches $750 million five-year notes; two sukuk on tap

By Rebecca Melvin

New York, Sept. 11 – Emerging markets debt was mixed on Tuesday as higher oil prices and weaker U.S. Treasuries counterbalanced trade worries, Argentina’s fiscal problems and investor worries over the upcoming Brazilian presidential election for which leftist candidates continue to lead in polls.

Higher oil prices tend to be positive for emerging markets’ commodity-dependent economies.

In the primary market, Latin America remained quiet, but the Gulf Cooperation Countries saw bank and banking-related entities moving ahead with deals.

Arab Petroleum Investments Corp., or Apicorp, launched a $750 million offering of five-year notes on Tuesday to yield mid-swaps plus 117 basis points, and a pair of sukuk, or Islamic bonds, were heard to be on tap for Wednesday.

Meanwhile National Bank of Oman SAOG was roadshowing its five-year conventional note on Tuesday, and DP World Ltd. and DP World Crescent Ltd. will start a roadshow on Wednesday for a new 10-year sukuk and possible 30-year conventional benchmark.

Apicorp, a multilateral development bank, launched its five-year notes (expected rating: Aa3) to yield mid-swaps plus 117 bps. That was tighter compared to guidance of mid-swaps plus 125 bps to 130 bps and initial price talk at mid-swaps pus 145 bps.

The deals on tap for Wednesday include Abu Dhabi Islamic Bank’s tier 1 perpetual security, which is non-callable for five years, and Al Hilal Bank’s five-year paper.

Meanwhile, Islamic Development Bank announced that it is preparing a sukuk, selecting banks and scheduling a roadshow for a five-year dollar deal.

But sovereign issuers across regions were essentially sidelined. There were no updates yet on Papua New Guinea’s U.S. dollar benchmark, according to a syndicate source.

The Argentine state-owned oil and gas company YPF SA was seeing a bit of activity in its bonds sparked by a tender offer for its $452.2 million outstanding of 8 7/8% senior notes that mature in December.

YPF is purchasing the notes at 100.5, which represents a small premium over par. But the bonds were down on Tuesday to 100.44, from 100.53 on Monday, dropping off after the tender was announced. Last Friday the bonds closed at 100.56.

YPF’s 6½% notes due 2027 were little changed around 82 to 83 after dropping on Monday. The bond has traded between 107.5 and 78.80 in the last 52 weeks, notching its highest levels last October and lowest level in April.

In Latin America, Argentina’s peso was weaker at near recent lows. The Brazilian real was also weaker. It has not regained ground lost since Aug. 20, when it breached 4 reals to the U.S. dollar.

The real weakened after a Datafolha opinion poll showed leftist candidates gaining ground ahead of the presidential election slated for Oct. 7.

Leftist candidates Ciro Gomes and Fernando Haddad were moving higher while Jair Bolsonaro, the right-wing populist candidate, who survived a near fatal stabbing at a campaign event, extended his lead slightly. But Geraldo Alckmin, a market-friendly centrist, didn’t make any headway.

A surge in oil prices could not cheer investors sour about the way the election is stacking up.

Oil prices rose more on supply concerns as U.S. crude oil production growth forecasts are coming in lower at the same time that the squeeze from sanctions on Iranian exports is expected to kick in. U.S. sanctions on Iranian oil are expected to go into effect on Nov. 4.

In the latest data, the U.S. Petroleum Institute showed U.S. crude inventories dropped 8.6 million barrels last week, compared to expected 805,000 barrel decrease.

Brent crude rose $1.69, or 2.2% to settle at $79.06 per barrel. The price of West Texas Intermediate crude settled 2.5% higher at $69.25 and rose higher after the market closed due to the industry data.

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