Bank of East Asia prices; Zenith Bank begins meetings; pipeline ‘fairly busy’ ahead

By Colin Hanner

Chicago, May 12 – Emerging markets ended the week with little to work with, a market source said, though they pointed to the long bonds in Saudi Arabia and Abu Dhabi, which were gaining some attention.

Those bonds were helped by the retreat in U.S. Treasury yields, which dropped towards the 3% mark, and then on Friday afternoon sank to 2.986%, all in response to weaker than expected U.S. retail sales data.

Outside of a handful of new issues coming to market on the week, the geopolitical scene has been rather muted.

“It has been a fairly calm week with relatively little news flow,” a market source said, adding that the biggest story to hit headlines was the initial firing of Federal Bureau of Investigation director James Comey and the continued fallout of his removal.

The calendar for the coming week is expected to be a “very busy week in geopolitics,” a market source said, with German state elections and Iranian elections taking place, as well as a handful of meetings with heads of state for president Trump before he travels abroad for the first time in his presidency.

Bank of East Asia’s benchmark

One benchmark deal squeezed out of emerging markets before the weekend on Friday as Hong Kong-based Bank of East Asia, Ltd. priced $500 million of 5 5/8% perpetual notes at par, a market source said.

The notes (BB/Ba2) priced tighter than talk that had been set in the 6% area.

The 5 5/8% coupon will hold until May 18, 2022 at which point it switches to the five-year U.S. Treasury yield plus 368.2 basis points, a market source said.

Goldman Sachs, Citigroup, HSBC, OCBC and SMBC Nikko were bookrunners for the deal.

Nigerian news

A budget for the Nigerian state was passed on Thursday, which includes a 21% increase in fiscal spending for the 2017 year, amounting to $24 billion, a market source said. Infrastructure spending accounts for nearly one-third of the budget, the source said.

On the corporate side, Lagos-based Zenith Bank will begin investor meetings for a five-year dollar-denominated benchmark bond, a market source said.

Fitch Ratings assigned an expected B+ rating for the notes on Friday.

Finansbank trades higher

Reduced flows characterized the market throughout the day in Europe and further east, a market source said, though Finansbank AS’ newly-priced $750 million of 4 7/8% five-year notes – which came to market at 99.671 to yield 4.95% – was driven higher by demand and was seen higher at a 100¼ handle.

Soon after it reached that peak, the notes pulled “back on some fast money profit taking,” a market source said.

Pipeline ahead

Senegal is expected to end investor meeting on Monday for a planned dollar-denominated benchmark bond with a maturity up to 16 years, a market source said.

“[Emerging market] credit remains in favorable position driven by further inflows,” a market source said. “Ahead of Ramadan starting in end-May, we are however likely to see a fairly busy primary market pipeline.”

Halk Banksi cancels deal

State-owned Turkish bank Turkiye Halk Bankasi AS (Halkbank) was expected to issue a dollar-denominated Basel-III eligible tier 2 transaction but has now withdrawn its plan to do so, a market source said.

The cancellation comes in the wake of the March arrest of Mehmet Hakan Atilla, Halkbank’s deputy chief executive officer, who was held in the United States on charges of violating sanctions against Iran.

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