New Turk Eximbank notes trade up; Dubai Islamic Bank notes trade well; Mexico sells $2 billion

By Rebecca Melvin

New York, Jan. 17 – The newly priced 8¼% notes from Turkiye Ihracat Kredi Bankasi AS (Turk Eximbank) traded up out of the gate on Thursday after the export credit agency priced $500 million of the five-year notes tight to initial price talk.

The new Turk Eximbank notes “traded straight up” from the 99.779 reoffer to 100¼ bid, 100½ offered, and the spread came in about 25 basis points from pricing at Treasuries plus 575.6 bps, a London-based trader said.

“After spending the London session in that ballpark, it then took another leg higher as the U.S. accounts came in to top up the allocations,” the trader said, putting the market close on the new 8¼% notes at 100 5/8 bid, 100 7/8 offered.

The deal came on the heels of the Turkish central bank’s action to stand pat on rates on Wednesday. This was a relief to markets since there had been concerns that the central bank would ease from the 24% rate benchmark, given easing inflation. Inflation fell from a 15-year high due to a rebound in the lira.

Turk Eximbank now has the distinction of being the first Turkish issuer to return to the international bond market, other than the sovereign, since the currency crisis hit emerging markets last spring.

The market for Turkey has shifted since last year, however. Turk Eximbank’s 8¼% coupon is more than 2 percentage points higher than the 6 1/8% coupon with which the bank’s six-year notes priced in April 2018. And the spread of the new deal at pricing was considerably wide, although a source noted that the new issue premium was only 20 bps compared to existing debt.

When asked about the change in pricing since last April, a second source said, “A lot has changed for Turkey since then.”

Dubai Islamic Bank ‘doing well’

Also on Thursday, the new perpetuals of Dubai Islamic Bank PJSC traded well after the bank priced $750 million of the bonds at par for a profit rate of 6¼%, or Treasuries plus 366.4 bps. The bonds are non-callable for six years.

The perpetuals were seen closing at 100.85 bid, 101.10 offered and “doing well,” a market source said.

In Latin America, the United Mexican States priced $2 billion 4½% 10-year notes at 99.382 to yield 4.577%, or a spread of Treasuries plus 185 bps, according to a term sheet.

Pricing came tight to initial price talk for a yield of Treasuries plus 210 bps area.

The yield spread at pricing stands 50 bps higher compared to the last time the sovereign priced a 10-year note. But the showing was considered a vote of confidence for Mexico’s new government under President Andres Manuel Lopez Obrador, nevertheless.

Mexico’s existing 2027 notes were about a point higher in heavy volume in the early going on Thursday. The mew 2029 notes were not heard in trade.

The weight of Mexico’s bonds in the JPMorgan emerging markets sovereign bond index will decline to 4.6% from 5.1% at the end of this month to make room for Arab Gulf paper that is being added.

Currently Mexico represents the single largest country in the sovereign index. Beginning Jan. 31, notes from Saudi Arabia, Qatar, United Arab Emirates, Bahrain and Kuwait will be added to the index at about 3.3%, 2.8%, 2.6%, 2.3%, and 0.7% in terms of weight, respectively. The additions will be phased in through the year.

© 2015 Prospect News.
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