Protests in Turkey tighten sovereign, corporate spreads; IPIC, Prague, Halkbank plan deals

By Christine Van Dusen

Atlanta, June 4 - Spreads narrowed amid a thin market on Tuesday as investors reacted to the ongoing protests in Turkey, which began peacefully on Friday but have since become increasingly violent.

"Much of the focus this morning remains on the riots in Turkey," a London-based analyst said. "After yesterday's widening, Turkey sovereign credit defaults swaps are 4 basis points tighter with cash five bps to 10 bps tighter."

Turkish corporates also started the session on better footing, about 3 bps to 10 bps tighter.

"If [the Turkish prime minister] backs down in the coming days, we would expect the protests to fade and would take the opportunity to reinvest at wider spreads based on strong long-term economic fundamentals as well as the introduction into investment-grade indices, which will create a positive technical backdrop," the analyst said. "However, there is also some probability for a worst-case scenario if the prime minister's rhetoric does not become more conciliatory."

The Markit iTraxx SovX CEEME ex-EU index spread on Tuesday was seen at Treasuries plus 204 bps, while the corporate index was sighted at 246 bps over Treasuries.

"Another tricky day, but less active than yesterday," a London-based trader said. "Liquidity is still testing and the depth to the market is thin. Spreads on the day are tighter."

In deal-related news, Abu Dhabi's International Petroleum Investment Co. (IPIC) is planning an issue of notes, the City of Prague is looking to price euro-denominated bonds, Turkey's Turkiye Halk Bankasi (Halkbank) is aiming for a dollar deal, and China's Hilong Holding Ltd. is planning to issue bonds.

Buyers like Dubai Holding

Buyers were seen for emerging markets assets, the London trader said, except for seven- to 10-year bonds from Abu Dhabi.

"Generally buyers around, apart from the names where the Street was still suffering from some indigestion," he said. "Dubai Holding paper is popular, and bouncing back today. Seen some buyers of Emirates NBD and Abu Dhabi Commercial Bank non-senior paper from retail investors in Asia and the Gulf region."

Middle East in focus

Notes from Saudi Electricity Co. were slightly tighter on Tuesday while Dubai and Dubai Electricity and Water Authority (DEWA) bonds were between 15 bps and 25 bps wider on the week.

"I still think DEWA's 2015s and 2016s are buys on dips," the London trader said. "The Qatar sovereign curve was a couple tighter, given the move in rates versus the close last night. Qtel International is still for sale, as is Abu Dhabi National Energy Co. (TAQA), for the most part."

Ukraine notes tick down

From Ukraine, volumes have been thin for sovereign bonds, with prices quoted about 1/4-point down, said Svitlana Rusakova of Dragon Capital.

Some buying was noted for the State Administration of Railways Transport of Ukraine's (Ukrzaliznytsia) new 2018 notes that priced at par to yield 9½% with Barclays, Morgan Stanley and Sberbank.

"It seems not much of this bond is around for sale," she said. "But corporates remained better offered."

Afreximbank sees demand

In other trading on Tuesday, retail investor demand was sighted for African Export-Import Bank's recent $500 million issue of 3 7/8% notes due 2018, a trader said.

The notes priced at 99.282 to yield mid-swaps plus 287.5 bps via HSBC, Commerzbank, Mitsubishi UFJ Securities and Standard Bank in a Regulation S deal.

The Cairo-based lender's notes closed Tuesday at 97½ bid, 98¼ offered.

South Africa rebounds

Also from Africa, South Africa bounced back, closing Tuesday about 10 bps tighter, the London trader said.

Two-way activity was noted for First Rand Bank while buyers were spotted for Eskom Holdings' notes near 105.

"Felt like there were buyers around on Morocco's 2022s and 2042s," he said.

The 2022s closed Tuesday at 96¾ bid, 98 offered. The 2042s ended the session at 93 bid, 96 offered.

IPIC to price notes

Abu Dhabi's IPIC is planning an issue of notes to repay $2 billion of loans, a market source said.

The company has said it wants to take advantage of lower borrowing costs.

"I'm not sure what IPIC and what market this is referring to," a trader said. "There were two superb times to issue in the past six months. The market has moved wider since then."

Issuance ahead for Prague

Prague is looking to price €200 million of bonds soon, a market source said.

The idea for a notes issue was first floated in October, with a 10-year tenor, and in January the city mandated CSOB and UniCredit Bank Czech Republic for a deal.

It is unclear whether these two banks remain the bookrunners for the new transaction.

Halkbank, Hilong on deck

Turkey-based state-owned lender Halkbank will price up to $3 billion of notes.

And China-based oilfields company Hilong Holding is planning an issue of notes with bookrunners Deutsche Bank and HSBC, according to a company filing.

The proceeds from the Regulation S deal will be used to repay bank borrowings, to expand the capacities of the company's coating materials and services segment and the oilfields segment and for general corporate purposes.

© 2015 Prospect News.
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