Peru sells notes; investors await Fed comments; profit-taking abounds; Codelco moves wider

By Christine Van Dusen

Atlanta, Oct. 27 – Peru sold new notes on a Tuesday that saw investors consolidating their positions on the first of the two-day Federal Open Market Committee Meeting.

“I can’t see any major surprises, given the data has only weakened since the last meeting,” a trader said. “One thing that is interesting is that more and more economists are expecting inflation to pick up in the next six months as the oil effect wears off. The major adjustment in price has occurred, and unless we get another significant drop its deflationary effects will start to fade, which is in line with the Fed’s ‘transitory’ message.”

Bonds from Turkey stayed firm on Tuesday, with rates heading off recent highs and five-year credit default swaps spreads getting closer to Friday’s tights, another trader said.

“The curve hit new steeps yesterday, but we are now seeing sellers in the belly at these rich levels,” he said. “Turkey banks and corporates are trading well, with real money topping up on holdings and positioning for this weekend’s elections.”

Asian bonds started the day unchanged to slightly tighter, then saw some profit-taking, which sent the bonds wider by about 3 basis points, another trader said.

China-based Cnooc Ltd., for one, widened 2 bps to 178 bps bid, 174 bps offered.

“We are mainly seeing real-money accounts trimming in small size this morning,” he said. “Korea financials are unchanged but seeing demand in the 10-year bucket before month-end. India banks are holding in.”

Former Pacific Rubiales dips

Latin America-focused Pacific Exploration and Production Corp. – formerly known as Pacific Rubiales Corp. – was trading lower on Tuesday, approaching the depths seen in September, on lower oil prices and the news that Ecopetrol SA will take over field operations in June of 2016.

“We are seeing a steady flow of bonds coming out,” a trader said. “This is old news and shouldn't be a surprise to investors. The company removed ‘Rubiales’ from its name as a reminder that the company’s future is elsewhere. Where that will be is unclear.”

Codelco widens, copper falls

Chile-based Codelco saw its bond curve widen by about 10 bps on Tuesday morning after the company cut its five-year investment plan in an effort to deal with oversupply of copper, a trader said.

“Seems to be a decent amount of sellers in the Street,” he said.

Copper prices fell in response to the Codelco news.

Petrobras flows even out

Flows were fairly even for Brazil-based Petroleo Brasileiro SA’s bonds on Tuesday, after seeing better buyers during the previous few sessions, another trader said.

“Institutional accounts seem to be better sellers,” he said.

There also seemed to be some profit-taking for Mexico’s high-grade names, which saw bids get pulled back after getting hit, he said.

CDS widen

In other trading from Latin America, Brazil’s five-year credit default swaps spreads moved slightly wider, closing on Tuesday at 449 bps from 448 bps.

Mexico’s moved to 150 bps from 146 bps, a trader said.

“Cash prices are a touch lower on spread widening but remain in yesterday’s context as U.S. Treasuries continue to rally,” he said.

Argentina’s bonds moved lower at the end of the day while Venezuela’s were mostly unchanged.

Beijing Auto trades

Beijing Automotive Group Co. Ltd.’s new €500 million 1.9% notes due 2020 that priced Monday at 99.261 to yield 2.057%, or mid-swaps plus 180 bps traded on Tuesday morning at 215 bps bid, 210 bps offered, a market source said.

The notes were talked at a spread in the 200-bps area.

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

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

Peru prices notes

In its new deal, Peru priced €1 billion 2¾% notes due in 2026 at mid-swaps plus 190 bps, a market source said.

BBVA, BNP Paribas and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general governmental purposes, including financial investment and refinancing, repurchasing or retiring its domestic and external indebtedness, according to a filing from the sovereign.

“Peru may also issue securities offered by this prospectus in exchange for any of its outstanding securities,” according to the filing.

Other details were not immediately available on Tuesday.

Sri Lanka gives guidance

Sri Lanka set initial talk in the 7% area for a dollar-denominated issue of 10-year notes, a market source said.

Citigroup, Deutsche Bank, HSBC and Standard Chartered are the bookrunners for the Rule 144A and Regulation S deal.

Issuance from Rizal

On Monday, Philippines’ Rizal Commercial Banking Corp. priced an upsized $320 million issue of 3.45% notes due in February 2021 at par to yield 3.45%, a market source said.

The notes were talked at a yield in the 3¾% area.

BofA Merrill Lynch, HSBC and JPMorgan were the bookrunners for the Regulation S deal.

The bank is based in Makati City, Philippines.

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