EM tone improves after U.S. releases data; Transelec, Suzano, Chongqing issues see activity

By Christine Van Dusen

Atlanta, July 8 – Emerging markets investors were cautious on Friday morning amid lower oil prices, then perked up after the United States released better-than-expected payrolls data.

“Following a very solid week in [emerging markets], we are ending on a very cautious note as Brent crude prices have taken a dive below $47 a barrel, from just $50 a barrel yesterday,” a London-based analyst said during the morning.

Later in the day, the better economic numbers from the United States improved sentiment, with the data “likely to maintain the favorable market backdrop, as the asset class has benefitted from investors being underweight ahead of the UK referendum and the search for higher yields in the current low-rate environment,” he said. “It might be stretching it a bit calling EM a safe haven, but many regions are seen as fairly insulated from Brexit.”

Indeed, inflows for the week were solid, he said, “with Asia, in particular, sought after in terms of regional exposure,” he said.

In trading on Friday, the new issue from Chile’s Transelec SA – $350 million 3 7/8% notes due 2029 that priced at 98.857 to yield Treasuries plus 260 basis points – traded at 99.70 bid, 100.20 offered, a trader said.

“Very light customer inquiry and Street volumes, so far,” he said.

Citigroup, JPMorgan, Scotiabank and Santander were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to repay debt and for general corporate purposes.

The deal was about 10 times oversubscribed, another market source said.

Suzano trades higher

Another new deal received some attention in the secondary market on Friday. Brazil-based Suzano Papel e Celulose SA’s new issue of $500 million 5¾% notes due 2026 that priced at 99.065 to yield 5 7/8% traded at 99.50, a trader said.

The notes, issued via Bahia Sul Holdings GmbH, were talked at a yield in the low-6% area.

JPMorgan and Santander were the global coordinators for the Rule 144A and Regulation S deal. BB Securities, Bradesco BBI, BTG Pactual and Itau BBA were the joint bookrunners.

The proceeds will be used to finance and refinance eligible green projects.

Chongqing Grain strong

On Friday the new issue of renminbi notes from China’s Chongqing Grain Group Co. Ltd. saw strong performance in trading, a trader said.

The grain and oil company on Thursday priced RMB 1 billion 4.02% notes due July 14, 2019 at par to yield 4.05%.

In trading the notes were seen Friday at 100.65 bid, 100.82 offered.

Bank of Chongqing, Hankou Bank, Hua Xia Bank, ICBC Singapore and Agricultural Bank of China were the bookrunners for the Regulation S deal.

The proceeds will be used for the repayment of debt and for general corporate purposes.

Petrobras prices taps

On Thursday, Brazil’s Petroleo Brasileiro SA (Petrobras) priced $3 billion of taps of its 8 3/8% notes due in 2021 and 8¾% notes due in 2026 via subsidiary Petrobras Global Finance BV, according to a company filing.

The deal included $1.75 billion 8 3/8% notes due May 23, 2021 that priced at 101.971 to yield 7 7/8% and $1.25 billion 8¾% notes due May 23, 2026 that priced at 99.981 to yield 8¾%.

The original issue of 2021 notes totaled $5 billion and priced on May 23. The original issue of 2026 notes totaled $1.75 billion and also priced on May 23.

The proceeds will be used to repurchase notes in a tender offer. Any remaining proceeds will be used for general corporate purposes.

BB Securities, BofA Merrill Lynch, JPMorgan and Santander were the bookrunners for the Securities and Exchange Commission-registered deal.

Petrobras is a Rio de Janeiro-based energy company.

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