EM assets sell off, then spreads tighten after expected NFP numbers; Finansbank in focus

By Christine Van Dusen

Atlanta, Dec. 4 – Emerging markets assets were in sell-off mode on Friday morning, ahead of the United States’ release of predictably strong payrolls numbers – news that later in the session led to slightly tighter spreads for some members of the asset class.

But the market was still “licking its wounds” after the European Central Bank’s efforts to prop up the economy were deemed disappointing, a trader said.

Said another trader, “Yesterday’s reduction of deposit rates by 10 bps ... and the extension of quantitative easing measures to March 2017, or even beyond, announced by ECB President Draghi disappointed investors that hoped for more.”

Banking bonds from Turkey saw some two-way activity on Friday, with subordinated debt getting squeezed and outperforming, he said.

“For corporates we did see real-money lifting, but it has taken a pause for now, so there’s a little bit of outperformance in sticky bonds,” he said. “Their spreads to the sovereign look OK overall.”

Also from Turkey, the market continued to watch Turkiye Finans Katilim Bankasi AS (Finansbank) and the bidding process for its business, another trader said.

The Istanbul bank is currently owned by the National Bank of Greece.

The trader said that ING, a fund from Qatar and BBVA – through Turkiye Garanti Bankasi AS – are now believed to be in the final stage of bidding on Finansbank.

But, he said, Qatar National Bank could still be “the most likely buyer, as Garanti and ING are also eyeing HSBC Turkey,” he said. “Any takeover by Garanti might be also subject to higher regulatory scrutiny.”

Lat-Am slow in the morning

Looking to Latin American corporate bonds, activity was tepid on Friday morning, a New York-based trader said.

Brazil’s corporates were weaker, he said, and high-grade names from Mexico were mostly unchanged, with Cemex SAB de CV finding some support on Thursday.

“If a few buyers come in, the curve should bounce off recent lows,” he said. “Some dealers don’t want to be short down here, it seems.”

Banks from Colombia were weaker on Friday, after the previous week’s buying activity dried up, he said.

“Continue to see intermittent selling of Chile high-grade from real-money accounts,” he said.

Afternoon spreads narrow a bit

At the end of the session, spreads tightened slightly, with Brazil’s five-year credit default swaps moving to 449 bps from 452 bps and Mexico’s narrowing to 159 bps from 161 bps.

“Cash prices get whipped around by intraday U.S. Treasury moves, which had us initially lower, post-NFP, but then completely reversed course and traded higher,” a New York-based trader said. “Equities and rates hit their strongest levels of the session.”

High-yield names from the region made few moves on Friday, he said, with PDVSA’s 2017s closing at 60½ from 60¾ and Venezuela’s 2027s unchanged at 42.

Tsinghua Unigroup draws orders

The new issue of notes from China’s Tsinghua Unigroup International Holdings Ltd. – $800 million of tranches due Dec. 10 of 2018 and 2020 – drew a final order book of $6 billion, a market source said.

The deal included $450 million 5¼% notes due in 2018 that priced Thursday at 98.978 to yield 5 5/8%. The notes attracted an order book of $3 billion from 150 accounts, with 94% from Asia and 6% from Europe.

Private banks picked up 60%, asset managers 31% and banks 9%.

The $350 million 6% notes due in 2020 priced at 98.416 to yield 6 3/8% and attracted $3 billion from 150 accounts.

About 94% came from Asia and 6% from Europe, with private banks buying 59%, asset managers 35% and banks 6%.

Credit Suisse was the bookrunner for the Regulation S deal.

The Beijing-based issuer is a semiconductor and technology company.

© 2015 Prospect News.
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