Middle East sovereigns mostly weaker amid Gulf States’ rift; Venezuela holding in; Pemex adds

By Rebecca Melvin

New York, June 6 – A number of deals priced in emerging markets on Tuesday and two deals were launched in the jurisdiction of Turkey, while existing Middle Eastern sovereign debt was mostly lower.

In Asia, Beijing-based lender China Construction Bank priced $600 million of 2¾% five-year bonds at a discount to par of 99.717 and Seoul, South Korea-based oil refiner GS Caltex Corp. priced $400 million 3% five-year notes at 99.839 late Monday.

Turkey is planning to launch Securities and Exchange Commission-registered euro-denominated eight-year bonds, and Turkey-based Yapi ve Kredi Bankasi AS (Yapi Kredi) is offering lira-denominated three-year notes with price talk in the 13¼% area. Further details on the planned deals were not immediately available.

In the secondary market, Middle Eastern credits were weighed down by Monday’s news that Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have cut diplomatic ties with Qatar, accusing Qatar of backing and aiding terrorism.

Saudi 3¼% notes due 2026 were indicated at 98.43 bid, 98.66 offered Tuesday, which was ¼ to 1/3 point lower compared to 98¾ bid, 99 offered on Friday.

Bahrain’s 7% notes due notes, a $600 million issue that priced early this year, were seen at 104 bid, 104¾ offered on Tuesday, compared to 104½ bid, 104.81 offered on Friday.

Oman’s 3 5/8% notes due 2021 were quoted with a 99.87 bid, 100.62 offered against 100.37 bid, 100.87 on Friday.

Venezuela, PDVSA steady

Venezuela’s 7% notes due 2018, the next maturity for the sovereign, were holding steady at 69 bid, 70 offered on Tuesday, according to a market source.

PDVSA (Petroleos de Venezuela SA)’s near-dated 8½% bonds due later this year were little changed on the day at 91½, and the benchmark PDVSA 9% bonds due 2021 were seen little changed at 52 bid, 53 offered.

The various series of Venezuela and PDVSA debt remains about four points better than where the paper had been trading three weeks ago in mid-May.

At that point, the debt decoupled from oil prices and gained on stronger demand, a market source said.

“One reason may be the noise that has added more people to the market. There are new participants,” the source said.

Along with better liquidity, investors seem to be betting on regime change, which has also supported the rally.

Meanwhile political turmoil continues in Venezuela with the risk of default, while temporarily on hold, still a real concern.

“Venezuela has been in trouble for a year-and-a-half, and the default has not happened,” the trader said, attributing the situation more to the fact that the government of Venezuela may be having trouble finding a guide for maneuvering the bankruptcy process rather than the fact that the government is determined to honor its commitments.

“They are not people who honor anything,” the market source said. But the market is more liquid now and trading better, he added.

Five-year, credit default swaps for Venezeuela was also steady on Tuesday, holding at the lower end of its recent range, and quoted at 3,200 basis points. That compares to the range current 3,200 bps to 3,400 bps range.

Pemex extends gains

Several of the bonds of Mexico’s state-owned oil company have been trading actively and better this week. Petroleos Mexicanos SAB de CV (Pemex)’s 6¾% notes due 2047 improved again on Tuesday to trade up at about 105 3/8 from about 104½ on Monday, according to Trace data. This paper gained more than a point on Monday.

Pemex’s 3½% notes due 2020 traded Tuesday at 102 from 101½. And the Pemex 5½% notes gained ½ point to trade at 107½ from 107 on Monday.

The result of the Mexico’s state elections on Sunday, including the victory of PRI candidate Alfredo del Mazo in the State of Mexico gubernatorial elections, had cheered, sources said.

© 2015 Prospect News.
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