Risk-off session for EM pre-holiday; Petrobras, Vale dip; Slovakia trades; Kenya eyes deal

By Christine Van Dusen

Atlanta, Jan. 15 – Investor sentiment was weak on Friday as oil prices continued to put pressure on emerging markets assets, leading to a quieter risk-off session ahead of the Martin Luther King Jr. holiday in the United States.

“We are expecting a fairly calm day, with the U.S. going into a three-day weekend this evening,” a strategist said. “That said, oil prices remain at depressed levels ... with Iran potentially off sanctions on Monday.”

From Latin America, names with more liquidity – like Brazil-based Petroleo Brasileiro SA and Vale SA – led the move lower, a New York-based trader said.

“Even [Bancolombia SA] paper, which had kept its bid all week, has thrown in the towel, moving at least a ½ point lower,” he said.

Mexico-based Cemex SAB de CV was well-offered and lower, he said.

“So far, no takers on that curve in any location as the U.S. high-yield CDX index continues its descent,” he said.

Paper from Braskem SA was lower but “holding up OK,” he said. “Not getting thrashed.”

And notes from high-grade Chilean issuers were starting to “get rattled,” he said.

“Client flows and inquiry are very light on an early-close, pre-holiday Friday,” he said.

In other trading, Slovakia’s new issue of €1 billion 1 5/8% notes due 2031 that priced at 99.894 to yield mid-swaps plus 38 bps were seen on Friday at 99.85 bid, 100¼ offered, a trader said.

Barclays, Erste Group and Natixis were the bookrunners for the Regulation S deal.

Slovakia draws orders

Slovakia’s new deal drew a final order book of $1.2 billion, with Austria and Germany picking up 34%, Slovakia 22%, the United Kingdom and Ireland 19%, Nordics 7%, France and Benelux nations 5%, Italy 5%, and others 8%.

Fund managers took 42%, banks 37%, insurers and pension funds 11%, and others 10%, a market source said.

Ukraine bonds soften

Looking to Ukraine, sovereign bonds softened further into the end of the week, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Aggressive buying of the last week is clearly taking a break,” he said. “Corporates remained stable.”

Kenya could issue notes

In deal-related news, Kenya is looking to issue eurobonds, a market source said.

This came as Kenyan officials denied that about $999 million in proceeds from its $2.82 billion bond sale in 2014 had been stolen.

A special probe is underway, the source said.

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