EM debt ‘heavy’; Slovak 2028, 2068 notes slip on debut; Croatia prices €750 million notes

By Rebecca Melvin

New York, June 6 – Emerging markets debt remained weak 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 last 12.73.

“The market is tricky and heavy overall,” a London-based trader said.

Despite the weakness, the Central and Emerging Europe region, which has been quiet for the past two weeks, had two new issues in the market.

The Slovak Republic’s newly priced notes slipped in trade on their debut after the sovereign priced €1.5 billion in two tranches of 10- and 50-year notes.

The new €1 billion of Slovak 1% notes due 2028 were seen at 99.65 bid, 99.80 offered after the notes priced tight to talk at 99.801, a London-based market source said. The notes came at a yield spread of mid-swaps plus 10 bps.

The new €500 million of Slovak 2¼% notes due 2068 were seen at 99¼ bid, 99.85 offered after pricing at 99.881 for a yield spread of 80 bps over mid-swaps.

Late on Wednesday the Republic of Croatia priced €750 million of 2.7% 10-year notes for a yield spread of mid-swaps plus 190 bps.

The spread was tightened from initial price talk at mid-swaps plus 220 bps.

The initial talk was viewed as a premium to the rest of the curve of 30 bps, according to a market source.

The final order book size for the new Croatia deal was €3.7 billion at the time launch details were released.

Deutsche Bank, JPMorgan and UniCredit are bookrunners for the Regulation S notes.

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.

CAF is a regional lender based in Caracas, Venezuela. It was last in the market for €1 billion of 1 1/8% notes due 2025 that priced at mid-swaps plus 40 bps in early February.

In the broader markets, U.S. Treasuries slipped, sending the yield on the 10-year Treasury benchmark up to 2.98%. The yield is still down compared to the middle of May when the yield on the 10-year was more than 3%.

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