Investors focus on oil producers’ meeting, Brazil impeachment vote; big Argentina deal on deck

By Christine Van Dusen

Atlanta, April 15 – Price action for many emerging markets bonds was erratic on Friday, as oil prices continued their decline ahead of the meeting of oil producers in Doha and the impeachment vote in Brazil, both set for Sunday.

The market is largely expecting that the oil meeting – featuring members within and outside of the Organization of the Petroleum Exporting Countries (OPEC) – will not yield an agreement on how to reverse oil’s slide.

“Lots of headline risk going into the weekend, with the Doha oil meeting and Brazil impeachment vote,” a trader said. “These events should serve up some volume early Monday as we get to our desks next week.”

On Friday, some bonds from Latin America, in particular, pulled back in trading “as dealers play it a little cautiously now, in front of Sunday’s [oil] meeting,” a New York-based trader said.

Some notes that recently saw big run-ups came out for the bid, he said, and dealers were “digesting this selling very well. It is still mixed, with some buying, even as some technicals become a little squeezed.”

Colombia’s Ecopetrol SA rallied during much of the week but by Friday weakened in the long end of the curve.

Meanwhile, long-dated bonds from the Middle East “caught the broader EM bid,” a London-based trader said, with names like Bahrain and DP World trading very well.

“The perpetual space perhaps turned a little more two-way towards the back end of this week, but they’re still popular,” he said. “Once again this market has displayed its resilience.”

Issuance expected

The time appears to be ripe for some issuers to bring new deals to the market, a London-based trader said.

“Commodities have rallied, China concerns linger but have subsided, and spreads have rallied since early February. Why would there not be supply in the coming weeks?” he said. “This is the window, this is the time.”

Lat-Am spreads widen

Taking another look at Latin America, volumes were low in the afternoon and spreads drifted wider, another trader said.

Brazil’s five-year credit default swaps spreads closed at 345 basis points from 338 bps, and “cash prices did trade a bit weaker as the market sees some position-squaring prior to the impeachment vote this Sunday,” he said.

Mexico’s CDS moved to 160 bps from 157 bps, he said.

“Cash prices are mostly unchanged and gyrate between small gains and losses depending on the credit and part of the curve,” he said. “Long end EM external paper does continue to outperform shorter-dated bonds, as most curves flatten.”

High-yield names from the region saw little movement on Friday, with PDVSA’s 2017s closing unchanged at 54.25 and Venezuela’s 2027s finishing at 40 from 40.25.

Argentina’s return to market

Argentina’s Bonar 2024s were unchanged at 111.50 on the news that the sovereign mandated Deutsche Bank, HSBC, JPMorgan and Banco Santander as global coordinators for up to $15 billion of bonds.

BBVA, Citigroup and UBS are also bookrunners for the deal.

The transaction is likely to be structured in three tranches due in five, 10 and 30 years.

This would be Argentina’s first bond issue in about 15 years.

“Client flows today were very quiet, with Street activity also subdued,” a trader said.

Tone stays mostly strong

Still, the tone for Latin American debt was mostly strong, another trader said.

“Dealers are more concerned with liquidity than valuations and technicals, and that has been driving the price action in the Street,” he said. “Many prints lack logic as they go through.”

Mexico-based Cemex SAB de CV saw firm bids in the face of fairly consistent but light selling, he said.

“It feels like the market is short 2026s now, after the opposite the prior two weeks,” he said.

Chile’s Cencosud SA was “finally gaining a little momentum after lagging the up-trade greatly recently,” he said. “[Brazil-based Vale SA] drifted a touch lower but still feels strong. Dealers have little intention of backing away anytime soon, and clients continue to cherry-pick the curve.”

Lebanon sets initial talk

Lebanon gave initial guidance for its upcoming two-tranche issue of dollar-denominated notes due April 22, 2024 and 2031, a market source said.

The eight-year notes were talked at a yield of 6.6% to 6¾%.

The 15-year notes were talked at a yield of 6.95% to 7%.

Blom Bank, Byblos Bank and Deutsche Bank are the bookrunners for the Regulation S deal.

Pricing is expected to take place next week.

China Aircraft on roadshow

China Aircraft Leasing Group Holdings Ltd. set out on Friday for a roadshow to market an issue of guaranteed dollar bonds, according to a filing from the company.

China Everbright Bank and DBS Bank are the bookrunners for the Regulation S deal. China Everbright Bank, DBS Bank and Bocom International Securities are joint lead managers.

The proceeds will be used to finance acquisitions, for business expansion and for other general corporate purposes.

The aircraft leasing company is based in Hong Kong.

Tunisia sets marketing trip

Tunisia will set out on April 21 for a roadshow to market an issue of senior notes, a market source said.

Natixis Securities, Commerzbank and JPMorgan are the bookrunners for the Regulation S deal.

The roadshow will be held in Europe.

China Sunshine prints notes

In a new deal, China’s Sunshine Life Insurance Corp. priced a three-tranche issue of $1.5 billion notes due April 20, 2019, 2021 and 2026, a market source said.

The $500 million 2½% notes due 2019 priced at 99.845 to yield 2.554%, or Treasuries plus 165 bps.

The $700 million 3.15% notes due 2021 priced at 99.784 to yield 3.197%, or Treasuries plus 197.5 bps.

And the $300 million 4½% notes due 2026 priced at 99.158 to yield 4.606%, or Treasuries plus 282.5 bps.

HSBC, ICBC, JPMorgan, CMB International and Morgan Stanley were the bookrunners for the deal.

The insurance company is based in Beijing.

Kia prices, trades

South Korea-based Kia Motors Corp.’s new two-tranche issue of $700 million notes due April 21, 2021 and 2026 that priced on Thursday drew a final order book of about $9.6 billion, a market source said.

The $400 million 2 5/8% five-year notes priced at 99.661 to yield Treasuries plus 145 bps, following talk of 145 bps to 150 bps.

In trading on Friday, the five-year notes were spotted at 134 bps bid, 131 bps offered.

The $300 million 3¼% notes due 2026 priced at 99.408 to yield Treasuries plus 152 bps, following talk in the 155-bps area.

The 10-year notes traded at 134 bps bid, 131 bps offered.

BofA Merrill Lynch, Citigroup, HSBC, JPMorgan and Nomura were the bookrunners for the Rule 144A and Regulation S deal.

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