EM primary quiet on U.S. shortened week; Saudi bond improves; LatAm oil names flat to weaker

By Rebecca Melvin

New York, July 3 – No new major-currency bonds were announced in emerging markets on Monday as a pause that began on Friday continued due to summer holidays and the U.S. Independence Day holiday, sources said.

U.S. financial markets closed early on Monday and will remain shut on Tuesday in observance of the holiday.

Among local currency deals, the Kazakhstan Finance Ministry sold KZT 250 billion of 9.1% nine-year treasury bonds, with the amount of accepted orders representing 100% of the issuer’s planned placement, the finance ministry said in a release.

Meanwhile, Kazakhstan’s Nostrum Oil & Gas plc has a dollar-denominated benchmark deal on the forward calendar. The Rule 144A/Regulation S deal was being marketed in Europe and the United States via Citibank, VTB Capital, Banca IMI and Deusche Bank as joint bookrunners.

Also in local currency deals, Zagred, Croatia’s Zagrebacki Holding doo, which provides municipal services and infrastructure-project financing, priced a HRK 500 million add-on to its of 3 7/8% notes due 2023 at about 105.75, according to an announcement.

Proceeds of the add-on will be used to repay Zagrebacki’s €153.7 million of 5½% notes due July 10.

In Asia, Philippine power generation company Aboitiz Power Corp. issued PHP 3 billion of 5.3367% 10-year bonds.

The company also received regulatory approval for a shelf registration for up to PHP 30 billion of fixed-rate bonds on June 19. The fixed-rate bonds will be offered to the public in tranches.

A few deals were added to the calendar, including Legend Holdings Corp.’s RMB 2.5 billion of corporate bonds that were talked at par with a fixed coupon of 4½% to 5½% and seen pricing later this week.

In April, the Beijing-based investment holding company announced plans to issue up to RMB 28 billion of debt financing instruments with maturities of no more than 15 years and perpetual bonds.

In Israel, mobile communications provider Partner Communications Co. Ltd. said it is considering a bond issue of up to NIS 300 million. Maalot S&P affirmed an ilA+ rating for the new bond series, which is subject to approval of the company’s board of directors and the Tel Aviv Stock Exchange Ltd.

Despite the slow, holiday session, there were pockets of activity in secondary emerging market action. In Eastern Europe, the Middle East and Africa, spreads were “holding in okay,” a London-based trader said, despite continued rates volatility and geopolitical concerns. An underperformer was South Africa.

Moves in interest rates have kept market players off balance. There was selling during London trading of ETFs and other assets. But there was still demand for the long end of Gulf Cooperation Countries, including Saudi Arabia, and those long bonds are essentially unchanged in cash price over the last week.

The trader did not expect new issuance this week from the Middle East given ongoing concerns about a breakdown of diplomatic ties among the Gulf Cooperation Countries.

In the early going on Monday, Qatari credit still struggled – although the long end has improved in the last week on the back of rate moves – as the clock ticked on a 48-hour extension of the deadline for the country to meet demands of a Saudi-led coalition, which include shutting down its Al Jazeera news network.

Qatar’s 2046 bonds closed 15 basis points tighter on the week and are now only 8 bps wider on the month. But Saudi credit has strengthened, and some of the curve stands at “record tights,” even as its list of demands go unmet as Qatar now has until Wednesday to respond.

The Saudi-led coalition, including Egypt, the United Arab Emirates and Bahrain, suspended diplomatic relations with Qatar on June 5, accusing it of supporting terrorism and destabilizing the region. Qatar says the accusations are unjustified and baseless.

In Latin America, no new deals were heard and trading was light to non-existent. “It’s very illiquid due to the holiday,” said a sellside source, based in Connecticut.

Indicated pricing showed Venezuela’s Petroleos de Venezuela SA flat to weaker. The PDVSA 12¾% notes of 2022 were quoted at 55 bid, 56½ offered, which was down from 60¾ bid, 61¾ offered a month ago on June 5.

The PDVSA 5 3/8% notes due 2027 were down to 35¼ bid, 37 offered, compared to 38 bid, 39 offered a month ago.

Meanwhile in Mexico, Petroleos Mexicanos, an investment-grade company, saw its 5½% notes due 2021 trading a bit weaker as well, but within the range of recent sessions. The bonds were last 105, compared to Friday, when they went out 105.62, according to Trace data.

Brazil’s Petroleo Brasileiro SA saw its 8 3/8% notes due 2021 trading weaker at 111.45 to 112 compared to 112.35 on Friday. But the Petrobras 7 3/8% notes due 2027 were seen at 106.25 to 107.5, compare to 106.5 last on Friday.

Overall, the secondary market, was “slightly more active than I expected ahead of the U.S. holiday tomorrow,” a trader said via an email message on Monday. Tuesday’s session was expected to be “moderately active” with U.S. markets closed, and on Wednesday activity is expected to pick up with economic data and the release of the minutes from the Federal Open Market Committee’s June meeting to provide some market focus.

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