EM debt starts second quarter on firm footing; Turkey, Ukraine notes higher with elections

By Rebecca Melvin

New York, April 1 – Emerging markets debt was buoyed on the first day of the second quarter as encouraging manufacturing data from China encouraged the broader markets on Monday.

The stronger Chinese manufacturing numbers, which hit a low last month, point to stabilization of global economic growth rather than further deterioration.

U.S. stocks and bond yields rose, with the yield on the benchmark 10-year Treasury notes stepping up at 2.496% from 2.416% on Friday, its biggest one-day rise since January.

The international bonds of Turkey and Ukraine were higher on the heels of mayoral elections for Turkey and a presidential ballot in Ukraine. Also on Monday, the United Mexican States announced plans to price dual tranches of euro-denominated global notes of seven- and 20-year duration.

Turkey’s notes jumped after mayoral elections across the nation pointed to significantly dimmed political clout for President Recep Tayyip Erdogan and following a four-day rout of Turkey’s financial assets last week.

On Sunday, Erdogan’s party lost a string of mayoral races including Istanbul, in what appeared to be a referendum on the Turkish economy, which shrank 3% in the fourth quarter of 2018 and looks set to contract further in 2019. In addition, the country is grappling with high inflation.

The Turkish lira gained nearly 2% after an early almost 2% drop on Monday.

Turkey’s 7 5/8% notes due 2029 were 100.085, which was up nearly a point on the day. The $3 billion issue hit a low last week of 97 amid the broader market rout, compared to a high for those notes of 105.1 set in early February.

Turkey 7¼% notes due 2023 rose three-quarters of a point to 101. 6 from 100.78 on Friday and 99.44 on Thursday. This issue is $1.6 billion in size.

Turkey’s 2029 notes were increased by $1 billion this month in an add-on issue to the original $2 billion issue priced in mid-January.

Preliminary results of the Turkish elections showed that Erdogan’s ruling Justice and Development Party, or AKP, won in 40 of Turkey’s 81 provinces, which was down from 53 victories for the party in the previous municipal elections in 2014. The national elections board stopped short of announcing a winner for Istanbul, but said the AKP was nearly 28,000 votes behind the rival Republican People’s Party, or CHP.

In Ukraine’s presidential election, the frontrunner with half the ballots counted is a television comedian with no political experience. Volodymyr Zelenskyy leads with 30% of the vote, representing a sizable advantage over incumbent Petro Poroshenko, with 16%. President Poroshenko aimed to appeal to conservative Ukrainians through his slogan, “Army, Language, Faith.”

A total of 39 candidates were on the ballot, with none receiving 50%, so the top two contenders will face off in a run-off election set for April 21.

Ukraine recently priced an add-on to its 9¾% notes due 2028, pushing the deal size to $1.6 billion. The notes were up 0.8% to 103.85 on Monday.

In the primary market, Mexico announced plans to price dual tranches of euro-denominated global notes in seven- and 20-year maturities, according to regulatory announcements

Deutsche Bank, JPMorgan, Santander and UBS Investment Bank are bookrunners of the notes, which are expected to be listed on the Luxembourg Stock Exchange and admitted to trading on the Euro MTF Market.

Mexico was last in the international bond market in mid-January with a $2 billion offering of 4½% 10-year notes (A3/BBB+/BBB+). Those notes priced at 99.382 to yield 4.577%, or a spread of Treasuries plus 185 basis points.

And Aragvi Holding International Ltd., which operates as part of the Trans-Oil Group, priced $300 million 12% five-year notes at par on Monday.

This issue had been in the pipeline for several weeks and represents consummation of a deal that was scuttled last year amid market volatility.

The bullet notes, which priced on top of guidance, were issued by Aragvi Finance International DAC.

Citigroup, Renaissance Capital and UBS were bookrunners of the notes, which will be used by the exporter of agricultural commodities to refinance current debt.

© 2015 Prospect News.
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