Emerging markets debt quiets into weekend; U.S. tax bill vote eyed; Turkey opens wider

By Rebecca Melvin

New York, Dec. 1 – Emerging debt market players were watching developments on a variety of fronts on Friday as trading slowed on the last day of the trading week and the first day of the month.

The Rio Negro province of Argentina priced $300 million of eight-year notes at par to yield 7¾% late Thursday.

In addition to focus on the passage of a U.S. tax reform bill, there were economic productivity reports from various countries including Brazil, which saw weaker growth of just 0.1% for the third quarter, according to the Brazilian Institute of Geography and Statistics, falling short of the 0.2% median estimate expected.

Brazil has been hit by political uncertainty surrounding the pro-business administration of President Michel Temer, whose battle with a series of corruption-related charges have hurt his ability to pass needed reforms including the social security reform.

Investors were also watching S&P Ratings Agency’s next move on Bulgaria, which ended up being an upgrade late Friday on the eastern European country’s longer-term foreign and local currency issuer default ratings to BBB- from BB+. S&P cited Bulgaria’s external debt ratios underpinned by an expansion of exports for the increase for the eastern European country. Fitch Ratings followed suit with an upgrade to BBB from BBB-.

But S&P’s downgraded Bahrain’s sovereign credit ratings to B+ from BB-, citing risks related to the low levels and heightened volatility of international reserves at the Central Bank of Bahrain and risks related to a potential deterioration of access to external liquidity.

Elsewhere, spreads on Turkey’s credit opened 2 basis points to 5 bps wider as the Iran sanctions evasion court case continued in New York.

Turkish banks mentioned in the case include AktifBank, DenizBank, Halkbank, VakifBank and TC Ziraat, all of which have denied allegations of involvement in activities that violated U.S. or international sanctions.

The bonds of Akbank TAS, which is the nation’s largest publicly traded lender along with Turkiye Garanti Bankasi AS, remained quiet on Friday after a jump on Thursday.

The Akbank 5% notes due 2022 stood at 99.65 which was unchanged on the day after shooting up 0.35 point on Thursday, and the Akbank 5 1/8% notes due 2025 remained unchanged at 96.55 after surging on Thursday by 0.57 point.

The Turkish lira ended slightly stronger however at 3.9139 per dollar. The currency has fallen about 10% against the dollar and 20%t against the euro this year.

The Republican Senate tax bill was expected to pass a vote of the full Senate but had yet been scheduled for a vote, according to reports late Friday.

The tone was more positive for its passage on Friday than late Thursday when the nonpartisan Joint Committee on Taxation released analysis that said the Senate plan would not meet the party’s goal of paying for itself through stronger economic growth.

According to the committee’s analysis, the plan would generate $458 billion in revenue from economic growth and add an extra $51 billion in interest payments over the next 10 years, leaving the net cost at about $1 trillion over the decade.

For next week there are more Latin America deals on the calendar, including deals from Brazil’s Gol Linhas Aereas Inteligentes SA, which is marketing notes through next Tuesday to fund a tender offer, Argentina’s Tecpetrol SA and Mexico’s Infraestructura Energetica Nova SAB de CV, or IEnova.

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