Morning Commentary: New issues perform in secondary market; EM rally slows; inflows decline

By Christine Van Dusen

Atlanta, April 29 – Newly priced bonds from emerging markets issuers performed in trading on Friday morning, even as a rally for risky assets appeared to be wrapping up.

“Week 11 of the EM rally is now coming to an end, with Markit CDX Emerging Markets and JPMorgan EMBI indices currently trading at multi-month lows,” a strategist said. “With no doubt, the softer U.S. dollar, in line with recovering oil prices, and the positive momentum have been major drivers.”

Flows into emerging markets assets by non-resident investors, which reached $37.1 billion in March, totaled $25.5 billion in April, according to the Institute of International Finance.

“Going into the long weekend here – early May bank holiday in the U.K. – the short-term outlook remains positive, with central bank decisions now behind us and major concerns at the start of the year showing no signs of reappearing,” he said.

This “benign market environment” has attracted issuers, he said.

Among them was Turkey, which on Thursday priced a $1.5 billion tap of is 6 5/8% notes due 2045 at 117.781 to yield 5.4%.

“This takes the total to $3 billion on the sovereign’s longest outstanding tenor,” the strategist said. “This potentially leaves another $1.5 billion in issuance for the remainder of the year.”

BNP Paribas, Goldman Sachs and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered issue.

The original $1.5 billion issue came to the market in February of 2014 at 99.026 to yield 6.7%, or Treasuries plus 297.2 basis points.

BofA Merrill Lynch, BNP Paribas and Goldman Sachs International were the bookrunners.

Black Sea trades higher

In other trading of new issues, Greece-based Black Sea Trade and Development Bank's new $500 million 4 7/8% notes due 2021 that priced Thursday at 99.27 to yield Treasuries plus 375 bps traded Friday morning at 101.52 bid, 101.98 offered, a trader said.

JPMorgan and HSBC were the bookrunners for the Rule 144A and Regulation S deal.

Huawei spread tightens

The new issue of notes from China’s Huawei Investment & Holding Co. Ltd. – a $2 billion issue of 4 1/8% notes due 2026 that priced Thursday at 99.716 to yield Treasuries plus 230 bps – traded Friday at 229 bps bid, 228 bps offered, a trader said.

ANZ, Bank of China, HSBC and Standard Chartered Bank were the bookrunners for the Regulation S deal.

The notes were issued via Proven Honour Capital Ltd., a subsidiary of the Shenzhen-based provider of information and communications technology solutions and services for telecom carriers, enterprises and consumers.

The final book was $5 billion from 233 accounts.

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