Turkey bonds see small relief rally after failed coup; Sekerbank shelves deal; Lat-Am dips

By Christine Van Dusen

Atlanta, July 25 – Turkey remained in focus on Monday as bonds experienced a small relief rally after the recent failed coup attempt, which led to the arrests of journalists, judges, police and others in a wide-scale crackdown.

On Monday, the sovereign’s five-year credit default swaps spreads moved 2 basis points tighter, clocking in at 275 bps.

“We have some two way flow going though, with the usual favored bonds being chased,” a trader said. “Things are now starting to normalize.”

Turkey’s KOC Holding AS saw its bonds move tighter after trading 130 bps wide to the sovereign, he said.

“Subordinated versus senior ratios snapped back after blowing out, and the banks continue the grind back in line,” he said. “That’s the easier trades out the way, without too much crystal ball gazing needed. Now we just wait to see what way the CDS goes from the current 270 bps mid.”

Meanwhile, crude oil prices dropped to about $45 per barrel from $50 and investors digested news from the weekend’s meeting of the finance ministers and central bank governors from the G20.

At the meeting, the participants said that the United Kingdom’s efforts to leave the European Union are adding uncertainty to an already vulnerable global economy.

“There was also a common understanding that more should be done to support growth and share the benefits of trade,” a London-based analyst said.

In general, emerging markets assets face “significant event risk” this week, according to a report from Commerzbank.

“We have the Federal Open Market Committee meeting on Wednesday, followed by U.S. second-quarter GDP data on Friday,” the report said. “By the end of the week markets will have greater certainty regarding the general direction of U.S. monetary policy. Consequently, it makes sense to adopt a cautious stance.”

Lat-Am widens

Bonds from Latin America moved wider and lower on the day, with prices closing only slightly better than the lowest of the session, a New York-based trader said.

Five-year credit default swaps spreads for Brazil closed Monday at 294 bps from 286 bps, while Mexico’s moved to 144 bps from 139 bps.

“Cash prices felt weak all day long as spread-widening was not tempered with any sort of Treasury rally, which has the market adjusting levels lower,” he said. “Lat-Am high yield also finishes lower on the day with oil weakness hitting Venezuela and PDVSA.”

PDVSA’s 2017s closed at 75.25 from 76, and Venezuela’s 2027s were down at 48.75 from 50, he said.

Argentina’s Bonar 2024s were mostly unchanged at 116.80, and the 2026s were down at 108.50 from 108.80.

“Flows light for the session, with better sellers from the inquiries we saw,” he said.

Sekerbank cancels

In other news from Turkey, Istanbul-based lender Sekerbank TAS has canceled plans for a dollar-denominated issue of notes amid political turmoil in the country, a market source said.

The company postponed a roadshow that was set to begin on July 17 and take place in Asia, Europe and the Middle East.

Bank ABC, Commerzbank, Emirates NBD Capital, Nomura Securities, Standard Chartered Bank and UniCredit were the bookrunners for the Regulation S deal.

Turk Telekom gets attention

Also from Turkey, two executives from Turk Telekom were summoned to a prosecutor for their alleged roles in a coup attempt, he said.

“Turk Telekom issued a statement, saying that it stands by the government and will continue to work closely with security forces,” he said. “On the positive side, the telco maintained its investment grade status with S&P despite the sovereign downgrade last week.”

Videsh draws orders

The new issue from India’s ONGC Videsh Vankorneft Pte. Ltd. – $1 billion notes due in 2022 and 2026 – was oversubscribed, according to an announcement from the company.

“The transaction is the largest transaction size achieved by an Indian issuer in 2016 and the first dual-tranche issuance from India in 2016,” the company said. “The 5½-year and 10-year notes were [about] 2.2- and 2.3-times oversubscribed, respectively, across 185 accounts.”

The deal included $400 million 2 7/8% notes due in 2022 that priced at par to yield 2 7/8%, or Treasuries plus 175 bps.

The $600 million 3¾% notes due in 2026 priced at 99.81 to yield 3.773%, or Treasuries plus 220 bps.

Citigroup and Standard Chartered Bank were the joint global coordinators and – along with DBS Bank, Mizuho Securities, MUFG and SMBC Nikko – the joint bookrunners and joint lead managers for the Regulation S deal.

The proceeds will be used to refinance part of a bridge loan.

“The notes saw a large geographic spread, with interested investors from Asia, Europe and offshore USA accounts,” the announcement said.

Most of the orders came from fund managers, banks, private banks, sovereign wealth funds and insurance companies.

© 2015 Prospect News.
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