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Morning Commentary: EM debt ‘heavy’; Croatia launches €750 million notes; Slovak Republic prices
By Rebecca Melvin
New York, June 6 – Emerging markets debt remained heavy early on Wednesday, with spreads on South Africa’s bonds wider by a few basis points although the South African rand came back in.
The rand dropped to a two-week low on Tuesday, pushing the level to 12.77 to the dollar, after data showed the economy suffered a contraction in the first quarter. On Wednesday, the rand was 12.73 last.
“The market is tricky and heavy overall,” a London-based trader said.
Despite the weakness, the new issue market was busy in the Central & Emerging Europe region.
The Republic of Croatia launched €750 million of 10-year notes in the early going, fixing the final deal size despite an order book that swelled to €3.7 billion. Pricing was tightened to mid-swaps plus 190 basis points from mid-swaps plus 220 bps.
The Slovak Republic’s new €1.5 billion in two tranches of 10- and 50-year notes were in the market on Wednesday after pricing was tightened by half for the shorter notes and was also tighter for the ultra-long 2068 notes.
The €1 billion 1% 2028 notes priced at 99.801 to yield 1.021%, or a yield spread of mid-swaps plus 10 bps, and the €500 million 2¼% 2068 notes priced at 99.881 to yield 2.54%, or a spread of 80 bps over mid-swaps.
Also in the euro market, Corporacion Andina de Fomento set pricing for an offering of five-year notes at a yield spread of mid-swaps plus 38 bps. CAF’s Regulation S notes were initially talked at mid-swaps plus high 30 bps.
Barclays, BBVA, Credit Agricole and JPMorgan are joint bookrunners of the deal that was expected to price on Wednesday.
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