Issuance from America Movil; EM firm as oil prices improve; lower inquiry for Lat-Am

By Christine Van Dusen

Atlanta, March 7 – Mexico’s America Movil SAB de CV sold notes on a mostly firm Monday for emerging markets assets as oil prices rallied on the news that Latin American producers were meeting and OPEC was looking for a higher anchor price.

“Following the strong performance of [emerging markets] credit last week, the setting is supportive, with Brent crude trading around $39 per barrel and U.S. Treasuries snapping back above 1.88%,” a strategist said.

Also on Monday, European Union leaders were meeting with Turkey to discuss the Syrian refugee crisis, ahead of peace talks, scheduled for Wednesday, he said.

“Ahead of the event, there have been increasing concerns with Turkey’s handling of media companies and the opposition,” he said. “Turkey credit seems to be rather undeterred this morning, and opens fairly unchanged from Friday.”

Turkish bonds were “a little bit stale, with prices largely unchanged across the curve,” a trader said. “Turkey banks and corporates are trading better after being heavy for a few weeks. It looks like the Street longs are being cleared.”

In other trading, names from Latin America were firm at the open on Monday, a New York-based trader said.

Profit-taking started to emerge as the session went on, he said, and clients continued to chase high-grade credits in Mexico and Brazil.

“Colombia corporates and banks have been quiet and still firm,” he said. “We sit close to Friday’s levels, a tough lower perhaps.”

Volumes and inquiry, he said, “are lower than normal.”

Investors also kept an eye on China, where officials are “gearing their policy more towards supporting growth through fiscal spending,” a trader said. “Probably means reforms are slightly less focused on in the near term.”

Ratings have little impact

Bonds from the Middle East did not react strongly to the oil-price situation and largely ignored recent ratings actions, a trader said.

Qatar, United Arab Emirates, Kuwait, Saudi Arabia, Abu Dhabi and Bahrain were among the 18 oil-exporting sovereigns that saw their ratings change.

“The ratings agency has revised its forecast on Brent crude prices down,” the strategist said.

Perpetual notes from the region remained popular, he said.

“Spreads overall were boosted by the move in rates, now north of 1.9%,” he said. “I must admit, I think a lot of value has eroded from the market in this recent rally.”

Though market-watchers have been talking about the possibility of new issues ahead, “it’s pretty light on the supply front,” he said.

Spreads improve

Later in the day, spreads for Middle Eastern bonds got a boost from the move in rates and perpetuals remained popular, another trader said.

“Bahrain tried to muster a little rally this morning,” he said. “However, it faded as the day wore on.”

Bonds from Iraq were in demand, trading with a 66 handle after trading between 60 and 61 in late-January.

In other news from the region, investors were whispering about a possible issue of seven-year notes from Kuwait’s Kipco Projects Co.

“A new issue with some sort of premium should be welcome, given their 2016 dollar note has become a six-month carry bond nowadays,” a trader said. “Kipco is pretty much the only way to gain any sort of exposure to Kuwait via the external bond market.”

America Movil sells notes

In its new deal, Mexico’s America Movil priced a €1.5 billion two-tranche issue of notes due March 10 of 2024 and 2028, according to a company filing.

The €850 million 1½% notes due in 2024 priced at 99.530 to yield mid-swaps plus 120 basis points. Talk was set in the 130-bps area.

The €650 million 2 1/8% notes due in 2028 priced at 98.461 to yield 2.273%, or mid-swaps plus 150 bps, following talk in the 160-bps area.

Citigroup, HSBC and Societe Generale CIB were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general corporate purposes.

Pakistan plans issuance

In other news, Pakistan is expected to raise $500 million of bonds by the end of June, a market source said.

The sovereign expects to sell a similar amount in fiscal 2017, and an additional $2 billion of notes in fiscal 2018.

The proceeds will be used to pay debt.

Other details were not immediately available on Monday.

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