New LatAm deals trade tighter in secondary; big inflow puts EM funds in black year to date

By Paul A. Harris

Portland, Ore., July 13 – A pair of Latin American deals that came Thursday, breaking a LatAm issuance drought which lasted more than three weeks, traded well on Friday, according to a sellside source.

The new Dominican Republic 6% notes due July 2028 were 10 basis points tighter on Friday.

The $1.3 billion 10-year deal priced at par on Thursday, on top of yield talk, and inside of guidance in the 6¼% area, sources said.

The Cemig Geracao e Transmissao SA add-on paper to the 9¼% bonds due December 2024 were seen 30 to 35 bps tighter in Friday trading.

The $500 million tap priced at 100½ on Thursday.

Both deals payed hefty new issue concessions, market sources said.

Dominican Republic payed about 20 bps, while Cemig paid at least 30 bps to get the deals done, the sellside source reckoned.

However a source close to the Cemig trade insisted that the company got a solid execution.

EM sees first inflows in weeks

This week emerging markets bond funds stanched a hemorrhage of red ink that ran for 11 consecutive weeks, according to a sellside source relating data in a weekly report from fund-tracker Emerging Portfolio Fund Research, Inc. (EPFR).

The funds saw $920 million of inflows in the most recent week, according to the sellsider.

Hard currency accounts saw the lion’s share of the inflows, at $460 million. Local currency accounts saw $300 million. Blended currency accounts saw $150 million of inflows.

The first positive flow in 12 weeks, it trails the previous week’s $1.52 billion of net outflows and returns the dedicated emerging markets bond funds to the green year to date at plus $330 million, the source said.

The weekly flows, interesting though they may be to watch, tell only a small part of the story about the cash to be put to work in emerging markets debt, an investment banker asserted on Friday.

With the global amount of emerging markets debt outstanding pushing $15 trillion, interest payments to the institutions alone should drive a hefty calendar going forward, the banker said.

Retail cash flows and coupon payments notwithstanding, there is presently a lot of cash to be put to work in emerging markets debt, sources on the buyside and sellside say.

State Bank of India green deal

Throughout the July 9 week State Bank of India, acting through its London Branch (Baa2/BBB-/BBB-), has been measuring the market for a benchmark offering of dollar-denominated green bonds.

The deal is expected to be $500 million to $750 million in size and could come in more than one tranche, the source added.

BofA Merrill Lynch, BNP Paribas, Citigroup, CreditAgricole CIB, HSBC, SBI Capital Markets and Standard Chartered Bank are the joint bookrunners and joint lead managers.

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