EM tone remains cautious; Poland, Eesti Energia, China Cinda, others could issue soon

By Christine Van Dusen

Atlanta, Sept. 1 – The tone for emerging markets assets was cautious on Tuesday after China released weak economic data and investors continued to wonder whether the Federal Reserve will hike rates this month.

“Despite the fact that most FOMC members, including Chair Janet Yellen, didn’t attend Jackson Hole, remarks from board member Stanley Fischer have indicated that a hike already in September cannot be ruled out,” a trader said. “All eyes are therefore on the Friday payrolls report.”

Asian names were a touch softer on “light volume,” a London-based trader said. “Indonesia sovereign cash is down ¼ point in the belly, and the long end is down ½ point to ¾ point.”

Spreads for high-grade bonds were mostly unchanged or slightly softer, he said.

Meanwhile, Brent crude was down 2.2% on Tuesday morning after a week of gains.

“It was reported that OPEC output has increased in August,” another trader said. “Yesterday, the OPEC announced that it is willing to talk to other producers to achieve fair prices while U.S. crude output estimates were reduced.”

From the Middle East, the curves for Saudi Electricity and Bahrain were steep on Tuesday, another trader said.

“Perpetuals are a mixed bag at the moment,” he said, “although Dubai Islamic Bank has gone better bid.”

In deal-related news, Poland is planning to price a benchmark-sized issue of euro-denominated notes due in 10 years, a market source said.

BNP Paribas, Deutsche Bank, HSBC and JPMorgan are the bookrunners for the Regulation S deal.

Deals ahead

Also on Tuesday, Estonia’s Eesti Energia AS announced plans for a euro-denominated notes as part of a tender offer, according to a company announcement.

And market sources were whispering about the possibility of upcoming deals from India-based TVS Logistics Services Ltd., India’s NTPC Ltd. and Saudi Electricity.

Lat-Am widens

From Latin America, low-beta spreads for sovereign bonds widened on the day amid a sell-off in commodities and equities, a New York-based trader said.

Brazil’s five-year credit default swaps spreads finished Tuesday at 367 basis points from 347 bps, while Mexico’s moved to 154 bps from 145 bps.

Venezuela gave back much of the previous day’s gains, as oil weakness crept in, with the 2027s closing at 40.50 from 42, he said.

“We saw good flows during this volatile session, with balanced two-way inquiries in the high-grade space,” he said.

Ukraine bonds react

Looking to Ukraine, a new ceasefire was expected to go into effect on Tuesday, capping off a recent decline in fighting and truce violations, though violent riots were reported in Kiev after the parliament gave more autonomy to the regions, another trader said.

This followed last week’s announcement that the country and its creditors had agreed on a debt deal that included a 20% haircut for an extension of four years at 7¾%.

The deal has been “perceived positively by markets, as Ukraine bonds jumped circa 15 points in the aftermath,” he said.

Trading mixed

Taking a closer look at Asia, credits remained resilient through most of the session, with some mixed performance and two-way activity, a trader said.

“Slightly weaker in China tech,” he said. “Sovereigns a touch weaker, led by Indonesia’s front end, but 30-year paper is seeing some support here.”

Turkey in focus

From Turkey, the president approved an interim government list, which will remain in effect until the country’s Nov. 1 snap polls, a trader said.

“On a positive note for Turkish banks, the Central Bank of the Republic of Turkey on Saturday proposed several measures ahead of a potential U.S. rate hike, including a 150 bps hike in the remuneration rate for reserves held in Turkish lira, a revision of the reserve requirement ratios and an increase in the foreign exchange transaction limit with the CBRT,” he said.

Eesti Energia plans notes

The new issue planned by Estonia’s Eesti Energia is part of a tender offer, according to a company announcement.

Deutsche Bank, Barclays, Nordea Bank Danmark and Swedbank are leading the transaction.

Holders of the company’s €400 million 4¼% notes due 2018 and €300 million 4½% notes due 2020 can tender the notes for cash.

The issuer is a utility based in Tallinn.

China Cinda plans deal

China Cinda Asset Management Co., Ltd. said it plans to issue up to RMB 16 billion of bonds soon.

The company previously received approval from the China Banking Regulatory Commission and the People’s Bank of China to issue the financial bonds in China’s interbank bond market.

Proceeds will be used to replenish the company’s operation capital, optimize the structure of its assets and liabilities and promote business development and financial innovation.

Based in Beijing, China Cinda provides asset management, consulting, investment, financial and risk management services to individuals and businesses.

Marisa Wong contributed to this article.

© 2015 Prospect News.
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