Bank of Japan sets off rally; Lat-Am names see volumes; South Gas Corridor seeks issuance

By Christine Van Dusen

Atlanta, Jan. 29 – China’s HNA Group Co. Ltd. sold notes on Friday as emerging markets assets rallied in the morning – after the Bank of Japan surprisingly introduced a negative interest rate policy designed to encourage economic recovery and fight deflation – then faded a bit into the close.

“We are seeing global yields tighten on the back of this surprise move,” a strategist said.

Still, oil prices remained top of mind.

“Oil price volatility remains very elevated,” according to a report from Barclays Capital. “Oil prices oscillated on reports of Russian willingness to participate in an OPEC meeting in February. Brent rose to above $34 per barrel before retracing lower. We do not think that a meeting would address the physical market imbalance.”

In trading, bonds from Asia were on better footing on Friday, driven by the BOJ decision and some recovery in oil prices, according to a report from Schildershoven Finance BV.

“Short-end Indonesian yields are under pressure due to the rate cut expectations, while Malaysian bonds have positively reacted to the budget update,” the report said.

Looking to Latin America, most of the volumes focused on names like Petroleo Brasileiro SA (Petrobras), Vale SA and Cemex SAB de CV, a New York-based trader said.

“We’re holding yesterday’s gains, and are a tad firmer, depending on the credit,” he said. “Cemex is clearly taking a breather from a nice run higher throughout the week. The curve is pretty much holding.”

Banks from Colombia were quiet and saw small gains while the Mexican petrochemical complex saw bids rise throughout the week, he said.

Lat-Am in focus

Brazil’s five-year credit default swaps spreads closed at 475 basis points from 473 bps on Friday, while Mexico’s finished at 195 bps from 194 bps, another trader said.

“We saw a very strong open but it did seem to fade as the day wore on,” he said. “Initially it seemed like it would be another day of tighter spreads and higher cash prices, but enthusiasm began to die down as some opportunistic selling took place after a solid week of gains.”

Names from Argentina and Venezuela ended Friday higher, with Argentina’s Bonar 2024s at 107.30 from 107, Venezuela’s 2027s at 36.75 from 36 and PDVSA’s 2017s moving up to 41 from 40.

“Volumes were expectedly heavy with month-end,” he said. “We saw mostly buyers in the morning but did see sellers emerge in the Street late in the day.”

Ukraine lags

Bonds from Ukraine have been slow to enjoy the boost in risk markets, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Ukraine is still lagging the global rally,” he said. “Corporates stayed very quiet.”

Issuance from HNA

In its new deal, China-based business conglomerate HNA Group priced a $35 million add-on to its 8 1/8% notes due Dec. 3, 2018 at 99.50 to yield 8.32%, a market source said.

The pricing matched talk, set at 99.50.

Guotai Junan International and VTB Capital were the bookrunners for the Regulation S deal.

The proceeds will be used for working capital and for general corporate purposes.

The issuer focuses on airport services, air transportation, real estate, hotel and catering, travel services, commercial retail, logistics and transportation, financial services and network information technology businesses.

South Gas Corridor seeks issuance

In deal-related news, Azerbaijan’s South Gas Corridor is looking to issue up to $2 billion bonds in February, a market source said.

The proceeds will be used to fund construction of projects to pipe gas to Europe.

The bonds will be guaranteed by the state.

Other details were not immediately available on Friday.

Pemex releases details

Mexico’s Petroleos Mexicanos (Pemex) released details on its $5 billion three-tranche issue of notes due in 2019, 2021 and 2026.

The $750 million 5½% notes due Feb. 4, 2019 priced at par to yield 5½%, or Treasuries plus 446.9 bps, after being talked in the high-5% area.

The $1.25 billion 6 3/8% notes due Feb. 4, 2021 priced at par to yield 6 3/8%, or Treasuries plus 497.50 bps after talk of a yield of 6 5/8% to 6 ¾%.

The $3 billion 6 7/8% notes due August 4, 2026 priced at 99.815 to yield at 6.9%, or Treasuries plus 491.6 bps, after talk in the 7 3/8% area.

BBVA, BofA Merrill Lynch, JPMorgan and Santander were the bookrunners for the Rule 144A and Regulation S.

The proceeds will be used to finance Pemex’s investment program and for working capital.

© 2015 Prospect News.
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