Quiet Friday in EM; new Rusal bonds bounce off lows; February calendar a question mark

By Christine Van Dusen and Paul A. Harris

Portland, Ore., Jan. 27 – Friday passed quietly in emerging markets debt, a London-based trader said shortly after the close.

Bonds printed earlier in the week by Russia’s Rusal Capital DAC bounced off intraday lows, the source said.

The Rusal 5 1/8% notes due 2022 (B1//B+) were 99¾ bid, after trading as low as 99.2 earlier in the day.

The $600 million deal priced at par.

With the end of the month in view, the prospects for new supply in February is an open question, the trader said.

“The market will be keeping its eyes on oil, Treasuries and Trump,” the source remarked, adding that at this point there does not appear to be a huge February pipeline.

Look for Tunisia to possibly show up with a euro-denominated deal – perhaps €1 billion – in February, with a roadshow early in the month.

Market eyes Mexico, Turkey

President Donald Trump’s plan to build a wall at the U.S. border with Mexico put the sovereign’s bonds in the spotlight on a mixed Friday, with Asian markets closed for the Lunar New Year.

“There’s certainly a lot going on in other places,” a London-based analyst said. “Following Trump’s executive order to construct the U.S.-Mexican border wall, things have arguably turned more hostile.”

The suggestion that the U.S. help pay for the wall by imposing a 20% tax on Mexican imports put pressure on the sovereign’s bonds.

Investors were also paying attention to Turkey, which was set to get an update from Fitch Ratings after the market close.

“Fitch remains the only rating agency to rate Turkey in investment-grade territory but has initiated a negative outlook,” the analyst said. “We consider a downgrade as more likely than not, but see a chance that Fitch might give Turkey the benefit of a doubt and revisit the rating on July 21, given the limited time since initiation of the outlook.”

Market reaction to a downgrade is likely to be benign, given that spreads already incorporate that change and there’s been a lack of forced selling against a still-solid market backdrop, he said.

“An affirmation could provide a positive catalyst in the near term,” he said.

In other news, the new issue of notes from India’s NTPC Ltd. – €500 million 2¾% notes due 2027 – drew a final order book of €2.2 billion, a market source said

The notes came to the market this week at 99.449 to yield 2.815%, or mid-swaps plus 200 basis points, via Axis Bank, Barclays, Citigroup, MUFG, SBI Capital Markets and Standard Chartered Bank in a Regulation S deal.

About 26% of the orders went to Germany and Austria, 27% to Asia, 12% to Italy, 10% to Switzerland, 10% to France, 9% to the United Kingdom and 6% to others.

Asset managers picked up 71%, insurance 6%, official institutions and central banks 17% and banks and private banks 6%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.