Market ripe for issuance; CAF, Gulf Investment, Macedonia advance deals; Turkey, Brazil improve

By Christine Van Dusen

Atlanta, Oct. 26 – Many emerging markets assets tightened on Monday, following the previous week’s strong rally on dovish comments from the European Central Bank, though activity was not hectically busy.

The recent tone seems to set a good backdrop for new bonds, a trader said, and several issuers did advance deals. On that list were China’s Beijing Automotive Group Co. Ltd., Venezuela’s Corporacion Andina de Fomento (CAF), Kuwait’s Gulf Investment Corp., Macedonia and Dubai’s Majid al-Futtaim Holding LLC.

“Given where rates and spreads are, I would expect a meaningful pick up in new issues,” he said. “Looking forward it seems like the market is starting to price in some of the expected rates diversion between euro and dollar rates, which should also play out in credit.”

In trading on Monday, Asian bonds continued to move higher during the morning, with spreads tightening about 4 bps, a trader said, although he noted activity was thin.

“Hong Kong corporates were pretty quiet,” he said. “Malaysia and Korea sectors were pretty quiet.”

Spreads for bonds from India were between 1 bp and 4 bps tighter, he said, and investment-grade financial names from Asia traded about 3 bps to 5 bps tighter.

“Korea banks are unchanged to a couple bps tighter,” he said “Indian banks are 2 bps to 4 bps tighter.”

Latin American bonds put in a fairly quiet session on Monday, though some names did see some action, with Brazil-based Petroleo Brasileiro SA moving higher again as clients and smaller funds added the notes, a New York-based trader said.

“Not seeing any sellers of Petrobras, a few sellers in [Vale SA], but inquiry is even,” he said. “Most credits feel either higher or unchanged so far. Many, of course, are not trading, so it’s hard to gauge movements.”

Brazilian corporates move up

Other Brazilian corporate bonds moved higher, as did higher-yielders, the New York trader said.

Chile’s Corporacion Nacional del Cobre de Chile (Codelco) was tighter, he said.

“The 2021s, which we have seen consistently better selling from accounts the last two months it seems, has been easily bid by dealers the last week and is another 10 bps tighter in that span after underperforming that part of the curve for quite a while,” he said.

The rest of Chile’s corporates were well bid and difficult to source, he said.

CDS tighten

Five-year credit default swaps spreads for Brazil finished Monday at 448 bps from 450 bps while Mexico’s moved to 146 bps from 148 bps, another trader said.

Cash prices moved higher by between 25 cents and 50 cents, with Argentina moving up significantly on positive election-related news and Venezuela moving up modestly despite oil weakness, he said.

“Solid two-way flows for the day, with better buyers of low-beta paper seen throughout the day,” he said. “The market appears to be in a pre-Fed holding pattern as we jockey around current levels and see some possible position squaring.

Turkey trades ‘fairly well’

Looking to Turkey, most bonds traded “fairly well” on Monday, a trader said.

“We are closing at the tights on credit default swaps,” he said. “Cash started to leak midday in the belly, but that may be due to switches as the Turkey 2026s versus 2043s are now at 50 bps.”

Banks were trading well, but flows were slower as the country’s elections neared, he said.

“Turkey sovereign cash is still trading firm but off the highs set on Friday morning,” another trader said. “The curve continues to steepen as the short base in the belly keeps it squeezed.”

Beijing Automotive gives guidance

In primary news, China’s Beijing Automotive Group set talk in the mid-swaps plus 200 basis points area for a five-year issue of euro-denominated notes, a market source said.

Bank of China, Bank of Communications HK, CCB International, DBS, JPMorgan, Natixis and UBS are the bookrunners for the Regulation S deal.

Beijing Automotive is a Beijing-based manufacturer of vehicles and parts.

CAF sets roadshow

Venezuela’s CAF will set out on Tuesday for a roadshow to market a euro-denominated issue of notes, a market source said.

BofA Merrill Lynch, Credit Agricole CIB, Credit Suisse and HSBC are the bookrunners for the Regulation S transaction.

CAF is a lender based in Caracas, Venezuela.

Roadshow for Gulf Investment

Kuwait’s Gulf Investment on Thursday will commence a roadshow to market a dollar-denominated and benchmark-sized issue of notes, a market source said.

Citigroup, HSBC, National Bank of Abu Dhabi and Standard Chartered are the bookrunners for the deal.

Gulf Investment is a financial services company based in Kuwait.

Macedonia mandates bookrunners

Macedonia has mandated Citigroup, Deutsche Bank and Erste Bank are bookrunners for an issue of notes, a market source said.

Other details were not immediately available on Monday

Majid al-Futtaim picks leads

Dubai’s Majid al-Futtaim Holding mandated Abu Dhabi Islamic Bank, Dubai Islamic Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered as bookrunners for a dollar-denominated issue of Islamic bonds due in 10 years, a market source said.

The notes will be benchmark-sized and issued through MAF Sukuk Ltd.

Proceeds will be used for general corporate purposes.

The company is a Dubai-based conglomerate.

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