EM secondary markets softer; primary active; Arab Petroleum, Poland’s BGK price deals

By Rebecca Melvin

New York, Oct. 25 – Emerging secondary markets were slightly soft early Wednesday as primary markets continued to price new deals, a London-based market source said.

Secondary market players were reacting to news and with the broader markets, including U.S. Treasuries and equities, which were lower.

Markets remain cautious following rates volatility that caused Treasuries to surge to a seven-month high as uncertainty around the choice for the next Fed chairman remains and ahead of the European Central Bank’s rate decision expected on Thursday.

In news, Turkey’s credit, for example, has seen spread widening in some Turkish banks by as much as 50 basis points this week, the source said.

Turkish banks came under scrutiny by investors after a local news report said that six banks might face fines by U.S. authorities for having dealt with Iran. The article published last weekend has been retracted following a statement by the Turkish banking regulator and Capital Markets Board that the report was based on unsubstantiated rumors, MUFG analyst Trieu Pham wrote in a note on Wednesday.

Meanwhile, new paper was pricing nevertheless, but there was “a bit of a dislocation between the secondary and the primary,” a market source said.

In the Middle East region, Saudi Arabia’s Arab Petroleum Investments Corp. priced a $500 million Islamic bond, or Sukuk, at par to yield 3.141%, or mid-swaps plus 100 basis points. But the deal priced late in the London-trading session with no aftermarket action yet seen.

Also new to the market on Wednesday was an issue from Poland’s Bank Gospodarstwa Krajowego, which priced €750 million of 10.5-year notes with a 1 5/8% coupon at 99.821. The Regulation S senior notes are guaranteed by the Republic of Poland, with proceeds earmarked for a national road fund.

Abu Dhabi Crude Oil Pipeline LLC, wholly owned by Abu Dhabi National Oil Co., guided talk on its $3 billion offering of senior notes (expected rating: AA/AA) in 12-year and 30-year tranches, a market source said.

Pricing of the $800 million tranche of 2029 bullet notes was guided to a yield in the 3.9% area.

The $2.2 billion tranche of 2047 amortizing notes was guided to a yield in the 4.8% area.

Pricing of the Rule 144A and Regulation S notes was expected to occur on Thursday with settlement on Nov. 2.

Also pricing was the Export-Import Bank of Korea’s $2 billion of notes in three tranches, including $400 million of three-year fixed-rate notes, priced with a 2½% coupon at 99.65 to yield Treasuries plus 90 bps; $1 billion of five-year fixed-rate notes priced with a 3% coupon at 99.853 to yield Treasuries plus 100 bps; and $600 million of five-year floating-rate notes priced at par to yield Libor plus 92.5 bps.

Philippines-based Asian Development Bank also came with a deal, pricing $1.5 billion of 2½% 10-year bonds on Wednesday at 99.168 to yield 2.595%, or 19.55 bps over Treasuries.

The bank said in a news release that the issue “achieved wide primary market distribution,” with 56% placed in Asia, 33% in the Americas and 11% in Europe, Middle East, and Africa.

In the Latin America region, several deals were heard in the pipeline including an issue for Banco Nacional de Costa Rica and another proposed three-year note for Banco de Credito del Peru.

In Africa, Kenya’s Supreme Court was expected to decide on whether Thursday’s planned repeat presidential election will take place. Kenyans have filed for cancellation after main opposition candidate Odinga withdrew from the contest in criticism of the electoral board.

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