Morning Commentary: South Africa plans two-tranche dollar notes; new Ukraine trades 99.5-99.75

By Rebecca Melvin

New York, Sept. 19 – Emerging markets players eyed the launch of the Republic of South Africa’s dual tranche offering of 10- and 30-year notes early Tuesday, which saw revised guidance of 4 7/8% to 5% for the 10-year tranche and 5¾% to 5 7/8% for the 30-year notes.

According to earlier media reports, the sovereign might issue about $2 billion of notes.

At this tightened pricing, it looks like the bonds would trade “about 5 to 10 basis points inside the Turkey curve (Ba1/BB/BB+), which we consider fair,” said MUFG credit strategy associate Trieu Pham in a note on Tuesday.

“We generally consider the Turkey curve as attractive” following the recent $1.75 billion tap on the 2047 notes, “but are somewhat wary of the geopolitical risks from the planned Kurdish independence referendum while Turkey’s higher external financing needs poise a somewhat higher risk ahead of [Wednesday’s] FOMC rate decision,” Pham wrote.

Elsewhere, the new Ukraine 7 3/8% notes due 2032 were seen in trade at 99.5 bid, 99.75 offered, according to a London-based source.

The Ukraine priced $3 billion of 14.25-year notes (expected ratings: /B-/B-) on Monday. Pricing came at the tight end of 7 3/8% to 7½% price talk, which was revised from the 7¾% area during marketing.

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