Colombia sells notes; Fed news boosts EM bonds; Lat-Am prices rise; South Africa, Turkey eyed

By Christine Van Dusen

Atlanta, March 16 – Colombia sold notes on Wednesday, while all eyes were on the Federal Open Market Committee, which lowered its expectations for economic growth this year – news that was good for emerging markets assets.

“Downgrades to U.S. economic growth expectations and median rate expectations for the end of 2016 are unambiguously good news for emerging markets,” according to a report from Commerzbank. “This implies that further large-scale EM currency depreciations are unlikely in the coming months. We can expect front-end yield compression to continue alongside declines in shorter-dated volatilities. All in all, this was not a bad meeting as far as emerging markets are concerned.”

For bonds from Latin America, it was a “rip fest,” a New York-based trader said, “with spreads aggressively tightening and cash prices surging.”

Five-year credit default swaps spreads from Brazil closed the session in the 415-basis-points area after moving as wide as 440 bps earlier in the day. Mexico’s ended the session at 161 bps from 169 bps.

“Cash prices were soft to start the session but went ballistic post-Fed, with almost any onscreen offer lifted,” he said. “Latin American high-yield also finishes higher on the day.”

Indeed, Venezuela saw its 2027s end at 41.75 from 40.50, while PDVSA’s 2017s closed at 54.30 from 53.30.

Argentina’s Bonar 2024s finished the session at 108.50 from 108.

“Flows to start the day saw mostly better sellers but this turned into decisively better buyers after the 2 p.m. Fed release,” he said. “A quantitative easing trade is in full swing as investors search for yield and push out rate hikes.”

South Africa under pressure

In other news, South Africa received attention on Wednesday as the finance minister remained under pressure from police after failing to cooperate with an investigation into surveillance by the revenue service.

“We expect the matters and investor doubts to be far from over,” a strategist said. “In our opinion, growth remains key, but credibility in fiscal budget and increasing borrowing costs could add to downgrade pressure.”

Investors in Turkey skeptical

From Turkey, the prime minister was expected to use “softer rhetoric” to push for more presidential powers, the strategist said.

“Investors are likely to remain skeptical, as a presidential system could further erode governance amid a renewed armed conflict versus Kurdish militants, alleged attacks on press freedom and doubts about central bank independence,” he said. “Most of the risks however seem to be priced in, as the recent terrorist attacks and the seizure of government critical media institutions have not led to a substantial widening in credit. From the current bearish point in view, the issues above will however prevent Turkey credit from outperforming.”

Colombia does euro issuance

Colombia sold €1.35 billion 3 7/8% notes due March 22, 2026 (Baa2/BBB/BBB) at par to yield 3 7/8%, or mid-swaps plus 322 bps, according to a filing from the sovereign.

BBVA, Goldman Sachs and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for budgetary purposes.

Carnival sells notes

On Tuesday, China’s Carnival Group International Holdings Ltd. sold $180 million 8% notes due March 22, 2019 at par to yield 8%, according to a company filing.

Pricing matched talk, set at 8%.

AMTD, CCB International, Haitong International and Quam Securities Co. Ltd. were the bookrunners for the Regulation S deal.

The proceeds will be used for general corporate purposes.

Carnival Group is a Hong Kong-based investment holding company that designs and develops tourist complexes in China and elsewhere that include theme parks, hotels, stores and leisure facilities.

New deal from Axiata

Malaysia’s Axiata Group Bhd. sold $500 million 4.357% Islamic bonds due March 24, 2026 at par to yield 4.357%, according to a company announcement on Wednesday.

CIMB, Deutsche Bank and HSBC were the bookrunners for the Regulation S deal.

Axiata is a Malaysian telecommunications provider based in Kuala Lumpur.

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