EM credit starts U.S. holiday-shortened week on firm footing; Nigeria sees high demand

By Rebecca Melvin

New York, Nov. 20 – Emerging credit markets opened on firm footing on Monday with higher underlying rates and stabilizing oil prices lending support and as investors look to fit most business into the early part of the week ahead of the U.S. Thanksgiving holiday on Thursday, according market sources.

Nigeria launched and ultimately priced $3 billion of 10- and 30-year eurobonds below initial talk after order books were oversubscribed by more than 2½ times.

The African nation priced $1.5 billion of 10-year bonds at 6½%, compared to initial talk at 6¾%; and $1.5 billion of 30-year notes at 7 5/8%, compared to initial talk at 7 7/8%.

The new paper looked cheap, a London-based source said, adding that the jury was still out regarding the appeal of the bond based on secondary market action in the issues on Tuesday.

Also on Tuesday, Export-Import Bank of China (Chexim) was expected to price two benchmark-size tranches of euro- and dollar-denominated notes.

Mexico’s Credito Real SAB de CV Sofom ER’s $200 million of subordinated perpetual notes were also expected to price on Tuesday at a yield guided to 9¼% area, from initial price talk in the low to mid 9% range.

Also in Latin America, at least one new deal may be announced on Tuesday, a market source said. But further details were not immediately available.

Back in secondary market action, Turkey’s sovereign bonds were an exception to generally solid markets, with the curve trading 7 basis points to 10 bps wider on the day and with greater weakness in the nearer-dated paper.

Depreciation in the Turkish lira was cited as an exception among major emerging markets currencies and down 0.9% to 3.90 to the U.S. dollar, according to MUFG strategist Trieu Pham in a note early Monday.

Investors were still eyeing Venezuela and Petroleos de Venezuela SA bonds as the Americas credit derivatives determinations committee of the International Swaps and Derivatives Association held a late meeting on Monday regarding auction details on credit default swap contracts on the debt of those issuers.

Payout on the contracts is typically decided through an auction of bonds submitted. The ISDA determinations committee decided last week that both Venezuela and PDVSA triggered failure to pay credit events in respect to several series of bonds.

The amount to be paid to those who invested in the insurance was seen to be around $1.1 billion, according to news reports, but the actual amount was not yet determined, a New York-based market source said.

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