Risk appetite improves on China data, then sputters on oil; Finansbank deal advances

By Christine Van Dusen

Atlanta, Jan. 19 – Emerging markets bonds continued to undulate on Tuesday, first firming up – with notes from Turkey tightening as much as 10 basis points on better-than-expected China data – then softening on oil prices.

“One set of positive data does not change the backdrop that has caused this January sell-off, and some are taking the opportunity to search for bids that have been absent in the market for two weeks,” a London-based trader said.

Liquidity was limited as West Texas Intermediate oil prices dropped and Brent prices bounced back a bit.

“Fickle day that gyrated with the oil price,” another trader said.

Investors were eyeing Turkey’s Turkiye Finans Katilim Bankasi AS (Finansbank), after National Bank of Greece entered into an agreement to sell its stake in Finansbank to Qatar National Bank SAQ. The deal is expected to take place during the first half of this year.

“Yesterday, the transaction took another hurdle, following the approval of NBG’s shareholders on the sale,” a strategist said.

Finansbank’s bonds tightened on the announcement but gave up some gains “amid a sell-off in EM risk since,” he said.

Finansbank’s 2017s traded at about z-spread plus 300 bps before the announcement and 285 bps after, he said. The 2019s went from 370 bps to 300 bps.

“At these levels and the current stage, we see further potential for tightening once the deal is completed,” the strategist said.

The removal of the NBG ownership, as well as the upgrade by Fitch Ratings, “will increase the investor base,” he said.

Sharjah gives guidance

In deal-related news, the Emirate of Sharjah set initial talk in the mid-swaps plus 250-bps area for a dollar-denominated issue of Islamic bonds due in five years, a market source said.

HSBC is the global coordinator and Bank of Sharjah, Barclays, Commerzbank, Dubai Islamic Bank, HSBC and Sharjah Islamic Bank are the joint lead managers and bookrunners for the Regulation S deal.

QNB, Azerbaijan could issue

Sources were whispering about a possible issue of bonds from QNB, which could be used to support its capitalization in light of the Finansbank deal.

In other news, market sources speculated that Azerbaijan could issue notes.

Two-way for Gulf Region

Looking at the Middle East, flows were mostly two-way, “which is a relief from most of the year so far,” a London-based trader said.

Bonds from Bahrain and perpetuals were trading near 77 on Tuesday morning, “an amazing move from par a year ago,” he said. “High-yield names have largely checked out of the game.”

Demand was sighted for Dubai Islamic Bank’s perpetuals, he said, which are 10 bps to 20 bps wider on the month and outperforming.

“I’d still argue there is some value in parts of the Dubai space,” he said. “Saudi Arabia is very choppy.”

So far this year, international accounts have been “lightening up,” he said.

Lat-Am mixed

From Latin America, bonds were mixed at the close on Tuesday after opening with a positive tone but petering out on changes in oil prices, a New York-based trader said.

“Spreads and cash prices were able to recover slightly into the close,” he said.

Brazil's five-year credit default swaps spreads finished at 504 bps from 507, while Mexico’s moved to 210 bps from 207 bps.

Venezuela moved higher, with the 2027s moving to 34.50 from 34.15, and PDVSA’s 2017s ended the day at 42.60 from 40.25, he said.

© 2015 Prospect News.
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