ECB move disappoints, moves spreads wider; Yapi Kredi on deck; roadshow for Medanito

By Christine Van Dusen

Atlanta, Dec. 3 – Latin American bond spreads widened into the close on Thursday as markets faltered on the European Central Bank’s increased – but, market-watchers say, still largely insufficient –efforts to prop up Europe’s economy.

Mexico’s five-year credit default swaps spreads widened to 161 basis points from 153 bps, while Brazil outperformed slightly as a result of the impeachment hearings. The latter sovereign’s CDS widened only a bit, closing at 452 bps from 450 bps.

“Cash prices were under pressure throughout the session as long-end U.S. Treasuries gap lower in a straight line and equities close near their lows,” a New York-based trader said.

Venezuela was “hit hard on the day” after Standard & Poor’s named PDVSA as a weak link, he said.

PDVSA’s 2017s closed Thursday at 60¾ from 61½, and Venezuela’s 2027s closed at 42 from 42¾.

Argentina’s bonds moved “a touch lower” but managed to be firm in the face of a selloff, he said.

“With the ECB out of the way and the market clearly disappointed, we are left to wonder what catalyst will help propel spreads tighter,” he said. “Tomorrow [the non-farm payrolls report] is on tap and also OPEC, which should provide some additional volatility to an already high-volatility market.”

Overall, EM bond flows are “tapering off as we finally hit another December and start thinking about putting another year of pain behind us,” a trader said. “For some this month is one to tie up loose ends, write reports and keep a low market profile. For others it’s a chance to position some risk ahead of 2016 at opportunistic levels.”

Yapi Kredi deal ahead

The trader was keeping his eye on the upcoming issue of notes from Turkey’s Yapi ve Kredi Bankasi AS (Yapi Kredi), which on Thursday continued its roadshow for dollar-denominated notes.

BofA Merrill Lynch, Citigroup, MUFG Securities and UniCredit Bank are the bookrunners for the Rule 144A and Regulation S deal.

“Feedback so far has been constructive, with some investors looking for a deal this side of the new year, despite the signal that it’s more likely a 2016 trade,” he said.

Lat-Am in focus

Many corporate bonds from Latin America continued to slowly move lower amid better selling on Thursday, a New York-based trader said.

Among the names that have been declining is Colombia’s Ecopetrol SA, he said.

Chile’s Corporacion Nacional del Cobre de Chile (Codelco) saw its spreads move wider while Brazil-based Petroleo Brasileiro SA’s were “stuck in neutral” and Brazil’s Vale SA was “ticking wider, as iron ore moves left once again,” he said.

“Colombia banks have also been a slow grind lower,” he said.

And Mexico-based Cemex SAB de CV was “struggling to find Street support,” he said. “Clients are not selling, but the curve seems like it moves left almost every day.”

Medanito sets roadshow

Also from Latin America, Argentina’s Medanito SA will on Dec. 7 begin marketing a possible issue of notes, a market source said.

The roadshow will begin in London and end on Dec. 8 in Zurich and Geneva.

Itau BBA and UBS Investment Bank are the bookrunners for the Regulation S roadshow.

Medanito is an oil and natural gas exploration company based in Buenos Aires.

Tianjin draws orders

The new issue from China’s Tianjin Free Trade Zone – $500 million 3 5/8% notes due in 2018 that priced at 99.536 to yield Treasuries plus 257.5 bps – drew a final order book of about $3.7 billion, a market source said.

The notes were talked at a spread in the 257.5-bps area.

DBS, Bank of China, Orient Securities and Standard Chartered Bank were the joint global coordinators. Agricultural Bank of China, Wing Lung Bank and Bocom International were the other joint bookrunners for the Regulation S deal.

The proceeds will be used to support projects, construction and development plans in China, and for working capital and general corporate purposes.

© 2015 Prospect News.
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