Issuance from Peru; Bahrain advances deal; oil prices fall on Iran comments; Lat-Am widens

By Christine Van Dusen

Atlanta, Feb. 23 – Peru sold new notes on Tuesday as oil prices fell on the news that Iran criticized the proposal by Russia, Saudi Arabia, Qatar and Venezuela to cap oil production at January levels.

The four nations are looking to address the oversupply in oil and stop the precipitous decline in prices, but Iran wants to increase output significantly this year, given that sanctions on its oil industry have been lifted.

Meanwhile, sovereign debt spreads for Latin America widened on the day, with Brazil’s five-year credit default swaps spreads closing at 467 basis points from 460 bps and Mexico’s finishing at 199 bps from 194 bps.

“Cash prices remain firm, and in some cases higher, as markets navigate intraday Treasury volatility combined with spread widening,” a New York-based trader said. “Latin American high yield is lower on the day, with Venezuela and Argentina weaker.”

Venezuela’s 2027s were at 38.25 from 39.50, while PDVSA’s 2017s closed at 45 from 46.

Argentina’s Bonar 2024s ended at 107.50 from 108.50.

“Flows today saw better sellers of almost all EM paper, with buyers only popping up sporadically,” he said. “Hopes are for some stability overnight.”

Corporate bonds from Latin America saw better buyers, and Brazil-based Vale SA moved higher, another trader said.

“But there was some Street profit-taking, which made the market look like it was turning a bit,” he said. “That put buyers on the sidelines, and we gave back some into the close.”

Petrochemical companies from Mexico “performed well in the face of better client selling,” he said. “[Cemex SAB de CV] also drove higher, even after yesterday’s big move. Bids are off their highs from midday but are standing strong.”

Brazil-based Gerdau SA saw better volumes, with the 2044s about six points off their lows.

Turkey leaves rates unchanged

From Turkey, the central bank announced that it would leave rates unchanged.

“As expected, the market is little changed,” a trader said.

And the United States and Russia announced a “widespread ceasefire” that will start on Feb. 27.

“A communication hotline and a potential work group would be set up to ensure that all sides are honoring the deal,” a strategist said. “While the deal is a positive step, there is still much skepticism with regard to the implementation and, more importantly, the sustainability of such a ‘cessation of hostilities.’”

Pakistan, Panama in focus

Activity picked up again for Pakistan, with real-money buyers zeroing in on the 2019s and “decent size” trades in the Street, a trader said.

From Panama, bonds were lifted across the curve, another trader said.

“This is likely a combination of U.S. Treasury strength as well as the relative safety of Panama versus peers,” he said. “The belly of the curve continues to outperform, with the 2024s garnering the most buying interest from inquiries and Street activity we have seen.”

Peru prints bonds

In its new deal, Peru priced €1 billion 3¾% notes due March 1, 2030 at 99.753 to yield 3.773%, or mid-swaps plus 295 bps, according to a syndicate source.

The notes were talked at a spread of 295 bps to 300 bps.

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

The proceeds will be used to pre-finance a portion of the general financial requirements for the year 2017, according to a filing from the sovereign.

Bahrain launches taps

Bahrain on Tuesday launched $600 million of taps of its notes due in 2021 and 2026 and set talk after canceling the deal last week, a market source said.

The $275 million tap of the 5 7/8% notes due Jan. 26, 2021 launched at 5.95%, matching talk.

The $325 million tap of the 7% notes due Jan. 26, 2026 launched at 7.65%, also matching talk.

Bank ABC, BNP Paribas, Citigroup, HSBC and JP Morgan are the bookrunners for the Rule 144A and Regulation S deal.

The deal was previously canceled after Bahrain’s credit rating was downgraded by Standard & Poor’s.

Temasek seeks issuance

Singapore-based investment company Temasek Holding Ltd. is looking to price euro-denominated and benchmark-sized bonds due in six and 12 years via subsidiary Temasek Financial (I), according to a company filing.

The proceeds will be used for general business purposes.

The deal will be Regulation S-registered.

Other details were not immediately available on Tuesday.

Iraq revives plans

Iraq has revived plans to issue dollar-denominated notes this year, and could print as much as $2 billion of bonds (expected rating: Caa1) during the second half of 2016, a market source said.

Other details were not immediately available on Tuesday.

In September Iraq held a roadshow for its $6 billion notes program with Citigroup, Deutsche Bank and JPMorgan.

Moody’s Investors Service’s rating is based on “Iraq’s sizable economy with robust growth prospects, which are based on the country’s large oil wealth,” according to a report. “The rating is counterbalanced by the country’s lack of economic diversification.”

The ratings also consider the country’s “very weak institutional strength and moderate fiscal fundamentals,” Moody’s said.

NTPC draws orders

The final book for India-based NTPC Ltd.’s new deal – $500 million 4¼% notes due 2026 that priced on Monday at 99.469 to yield Treasuries plus 255 bps – drew a final order book of about $1 billion.

On Tuesday the notes opened at Treasuries plus 253 bps and traded as wide as 258 bps, a trader said.

Barclays, Citigroup, Deutsche Bank, HSBC and SBI Capital Markets were the bookrunners for the Regulation S deal.

Asian accounts picked up 68%, offshore accounts 1% and emerging Europe, the Middle East and Asia picked up 31%.

Fund managers bought 57%, insurance and pension funds 22%, banks 10%, central banks and sovereign wealth funds 7%, and private banks 4%.

NTPC is a New Delhi-based power company.

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