Mexico bonds dip, South Africa performs; oil, data on radar screens; Saudi Arabia active

By Christine Van Dusen

Atlanta, Nov. 1 – Bonds from Mexico dipped and South Africa outperformed on Tuesday as oil prices mostly stabilized, investors awaited economic data from the United States, and much of Europe was out for the All Saints Day holiday.

“Overall active day ahead of payrolls on Friday,” a source said.

“We expect flat trading today with moderate price growth,” according to a report from Schildershoven Finance BV.

Said a London-based analyst, “Oil prices continued to plummet yesterday but stabilized overnight, with both WTI and Brent crude remaining somewhat distant from the $50-barrel threshold.”

From Latin America, prices from bonds from Mexico were lower, with mixed performance across the curve, a trader said.

“The long end seems to be doing a bit better,” he said.

Investors were keeping an eye on South Africa, where bonds outperformed on reports that the National Prosecuting Authority would drop fraud charges against Finance Minister Gordhan, the analyst said.

“The decision is undoubtedly a relief to markets, but we’re far from done,” he said. “At this time, it remains unclear what impact [this move] has on the ongoing investigation against a rogue unit within the South African Revenue Service. Some will see the latest events indicating the faction behind Gordhan gaining overhand in an ongoing political infighting in the ANC.”

Investor sentiment “will likely remain buoyed on the Gordhan story,” he said.

From Turkey, the only part of the curve that traded well was the front end, another trader said.

“Buyers are few and far between for now, with locals back bidding on the curve,” he said. “But they have soaked up a lot of bonds on the way down.”

Turkish banks saw two-way trading, he said, and telecommunications names felt well-offered.

Novolipetsk receives attention

Also on Tuesday, investors were looking at Russia’s Novolipetsk Steel’s (NLMK) strong third-quarter financial results, released this week.

“However, the market effect is likely to be neutral due to the tight pricing of the eurobonds,” Shildershoven said in its report.

And Hungary was upgraded by Moody’s Investors Service.

“Hungary’s rating upgrade by Moody’s would not dramatically change the situation, but may add some positive to investors,” Schildershoven said in a report.

Gulf bonds active

Trading of Middle Eastern bonds was “very active” on Tuesday, according to a London-based trader.

Saudi Arabia’s new megadeal saw some “price gyrations” as a result of the move in rates, he said.

The new $5.5 billion 2 3/8% notes due in 2021 priced at 99.007 to yield 2.588%, or Treasuries plus 135 basis points. The $5.5 billion 3¼% notes due in 2026 priced at 98.679 to yield 3.407%, or Treasuries plus 165 bps.

And the $6.5 billion 4½% notes due in 2046 priced at 98.015 to yield 4.623%, or Treasuries plus 210 bps.

“Large flow overall today, and pretty balanced,” the trader said. “The 2021 really is impressive, and pushes another couple tighter. Feels like more and more Asian accounts are looking and getting limits and lines in place.”

Paper in “good size” went through on Tuesday, he said. “These bonds remain the liquid [Gulf region] bonds. The Street remains long on [Rule] 144A paper.”

Middle East in focus

Abu Dhabi National Energy Corp. (TAQA) saw two-way flows, with the 2023s pushing 25 bps tighter on the month, the trader said.

“There was some U.S. real money demand and topping up on Oman yesterday for month-end,” he said. “Similar story on the recent Jordan 2027s. Saudi Arabia flows have seen Abu Dhabi and Qatar take a little bit of a backseat, as far as volumes go.”

Dubai’s DP World was active, with its 2023s moving to the high 102s.

“Still pockets of adding on this one,” he said. “Perpetuals are better offered.”

Buyers were seen for Saudi Electricity Co., with its 2044s trading in the mid- to high-104s and the 2023s and 2024s in demand, he said.

Equate trades

The new issue of notes from Kuwait-based Equate Petrochemical Co. KSCC – $2.25 billion of senior notes due in 2022 and 2026 – saw balanced flows on Tuesday, a trader said.

The company priced $1 billion 3% notes due 2022 at mid-swaps plus 195 bps and $1.25 billion 4¼% notes due 2026 at mid-swaps plus 270 bps.

The 2026s, which saw only buyers on Monday, closed on Tuesday 4 bps tighter than issuance while the 2022s were “a bit soggy, here closing 193 bid, just 2 better versus pricing,” he said.

Citigroup, HSBC, JPMorgan and NBK Capital were the global coordinators and joint bookrunners. Banca IMI, Mizuho Securities, MUFG and SMBC Nikko were also joint bookrunners.

© 2015 Prospect News.
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