Greece news boosts EM, but bailout terms are tough; bonds from Asia, Latin America tighten

By Christine Van Dusen

Atlanta, July 13 – Emerging markets assets strengthened on Monday on the news that euro zone leaders will give Greece up to $96 billion in bailout funds if the troubled sovereign adopts significant austerity measures – measures that Greek voters opposed in last week’s referendum.

Asian credits started out on Monday “a touch softer” prior to the agreement in Greece, a London-based trader said.

“The afternoon session market turned around as euro zone leaders started leaking that an agreement with Greece had been made,” he said. “Investment-grade cash soon followed, and closed the day 3 bps to 5 bps tighter.”

Bonds from Korea were quiet, though the Korea Export-Import Bank (Kexim) curve was 3 bps tighter, he said.

“India is 5 bps tighter,” he said.

Spreads for Middle Eastern bonds performed as rates moved lower on the back of the Greece headlines, a London-based trader said.

“Generally, better buyers of lower-spread product, with some adding in Qatar and Abu Dhabi,” he said. “Qtel International trades well. It's a struggle to source the belly of the curve.”

Saudi Electricity Co. saw its bonds narrow by 3 bps, and Abu Dhabi National Energy Co.'s 2036s (TAQA) moved in by 2 bps.

“All told, the holidays, summer and Ramadan – plus zero issuance and redemptions upcoming – sees the market remain technical and supported,” he said.

Latin America-focused Pacific Rubiales Energy Corp. was mostly quiet and unchanged in trading on Monday after Fitch Ratings downgraded the issuer two notches, a New York-based trader said.

Finansbank affected by Greece

From Turkey, lender Finansbank AS received some attention, given that it is one of the core performing assets of the National Bank of Greece, a trader said.

“We, along with others, were looking to buy into the bond curve on any weakness,” he said. “Unfortunately the bonds were firmly bid as rumors of Qatar National Bank or Arab Banking Corp. being interested in a stake of the bank hit the wires.”

Now, with the latest news from Greece, National Bank of Greece “is no longer a forced seller,” he said. “They can defer back to previous disposal plans.”

Akbank bonds set to mature

In other news from the Turkish banking sector, Akbank TAS is preparing for $1 billion of its bonds to mature next week, a trader said.

“This leaves only [Yapi ve Kredi Bankasi AS]'s 5 3/16 eurobond maturing this year, and a limited amount of paper in 2016,” he said. “And none of it is easy to find. Expect to see an uptick in issuance that will lead to lower rates filtering through.”

LatAm tightens

From Latin America, low-beta spread ended the day tighter, buoyed by a rally in risk assets, on a day of quiet flows, a New York-based trader said.

Five-year credit default swaps spreads for Brazil finished Monday at 252 bps from 256 bps while Mexico's moved to 125 bps from 127 bps.

Prices were close to Friday's levels, he said.

Bonds from Venezuela moved lower while Argentina continued to trade in a higher range, he said.

Xinjiang Goldwind on road

China’s Xinjiang Goldwind Science & Technology Co. Ltd. will set out on Tuesday for a roadshow to market a dollar-denominated offering of green bonds, according to a company announcement.

Bank of China, Deutsche Bank and Societe Generale are the bookrunners for the Regulation S deal.

The proceeds will be used for general corporate purposes, for working capital purposes and to on-lend to any companies controlled by the group.

Xinjiang Goldwind makes wind turbines. It is based in Urumqi, China.

Weichai plans issuance

China's Weichai Power Co. Ltd. – through subsidiary Weichai International Hong Kong Energy Group Co. – is looking to issue bonds totaling €500 million, or the equivalent amount in dollars, according to a company announcement.

The proceeds will be used for general corporate purposes and to repay borrowings related to the acquisition of shares of KION Group AG.

Weichai Power is a Weifang, China, maker of diesel engines.

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