Middle East, Africa enjoy strong tone; Gabon tap improves; Peru’s Cerro del Aquila to price

By Rebecca Melvin

New York, Aug. 8 – Emerging markets saw a positive tone in the Middle East and Africa regions on Tuesday where the Gabonese Republic priced a small tap as investors watched political developments including Kenya’s presidential elections and a no confidence vote on the slate regarding South Africa president Jacob Zuma.

The new Gabon 6.95% notes due 2025, of which $200 million priced at 100.587 to yield 6.85%, improved 5 or 6 basis points after the break, a London-based trader said.

Zuma survived the National Assembly no confidence vote, which was defeated 198 votes to 177 votes, even though it was a secret ballot expected to encourage more opposition votes. The Kenya elections underway were still too close to call.

On Monday, South Africa’s sovereign debt improved by 5 to 7 bps after it was announced that the vote would be secret, and on Tuesday, spreads continued to hold in.

“The market is in good shape overall. All of Africa is a lot tighter in the [last few weeks],” the trader said.

The Middle East was also firm with the well-received Iraq notes that priced last week trading strongly at 100¼ bid, 100½ offered.

The one sore point was Lebanon. But there was no obvious reason for the weakness in the debt curve there, a source said.

In Asia, Agile Group Holdings Ltd. priced $200 million of five-year senior notes at par with a 5 1/8% coupon.

The Hong Kong-based property developer’s notes are non-callable for three years. The deal was sold via joint bookrunners HSBC, Standard Chartered Bank, Agricultural Bank of China and China Securities (International) Finance, and proceeds will be used to refinance debt.

Markets in Latin America were a little heavier in afternoon trading as Treasuries ended little changed following intraday weakness that sent the yield on the 10-year Treasury to as high as about 2.29% on the day. The 10-year benchmark yield ended the day at 2.26%.

On tap for Wednesday’s new issue business was Peru-based Cerro del Aguila SA’s planned $650 million of 10-year senior notes (Baa3/BBB-). The notes were being talked with a yield over Treasuries in the low 200 bps range and were being sold via joint bookrunners Credit Suisse, JPMorgan, Scotia and Credicorp.

Cerro Del Aguila is a power generator that plans to use the proceeds to fund project finance.

There were no other new issues heard to be pricing imminently in Latin America.

In Venezuela, the sovereign’s 7% notes due 2038 were around the 35 mark – two months those notes were around 45. The Petroleos de Venezuela SA 5½% notes due 2037 remained around 33.

The Venezuela and PDVSA bonds slipped on Monday in reaction to news that over the weekend two anti-government fighters were killed when a group attacked a military base in the central city of Valencia. President Nicolas Maduro forcefully pushed back saying that the surviving attackers, which escaped, would be caught and receive the maximum penalty for their actions.

Africa strengthens

The new notes printed by the Gabonese Republic improved by 5 or 6 points early Tuesday.

South Africa National Assembly ruled against a no confidence vote against beleaguered president Zuma, and it was expected that the unsuccessful vote would mean rand and South Africa credit would likely give up their Monday gains. South Africa sovereign debt had tightened 5 to 7 points on Monday.

But in Tuesday’s session, as the decision was being taken, “the market in good shape overall,” a source said.

Elsewhere, as Kenyans queued to vote for a new president, that sovereign’s 6 7/8% notes due 2023 were seen 102½ bid, 103¼ offered, with a spread that was in about 35 bps.

Kenya presidential elections were a tight race between the incumbent Uhuru Kenyatta and main challenger Raila Odinga. Kenyatta is seeking a second and final term in office; there are six other candidates on the ballot. In the last week, the murder of a top election official has cast a pall over the Kenyan elections where there are accusations of ballot rigging.

In the last several weeks, the overall Africa complex, a high beta group with spreads about 500 to 700 bps over Treasuries, was seen tighter by 40 to 100 bps, a market source said.

“It’s “a lot tighter,” the source said, as investor demand remains strong and money is put to work.

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