EM debt primary ticks higher; African Development Bank taps market; Banorte prices CHF 250 million of notes

By Rebecca Melvin

New York, March 15 – An uptick in new issuance in emerging markets debt this past week included Latin America and Africa, which have been conspicuously absent from the primary market so far this year.

Market players expect improved market conditions to prompt further issuance this month, although two central bank meetings could crimp activity next week.

The newly priced 30-year paper of Petroleo Brasileiro SA, which priced $3 billion of new notes on Wednesday, edged higher again.

The state-run oil and gas company’s $2.25 billion issue of 6.9% notes due 2049 was seen at 101 on Friday, which was up another 0.15 point to 0.25 point. But the 5¾% global notes due 2029, which saw an additional $750 million of notes price this week, slipped below 99 on Friday, which was down more than 0.75 point.

The secondary market overall was seeing firm pricing, with the iShares JPMorgan, U.S. Dollar Emerging Markets Bond ETF up another 0.44 point to just over 109.00. The ETF seeks investment results that correspond to the price and yield of the JPMorgan emerging markets bond index.

Meanwhile, African Development Bank joined the list of this week’s issuers, with the Abidjan, Ivory Coast-based multilateral development bank pricing €1 billion of ½% notes due 2029 at 99.447 for a yield of 0.557%.

Further issuance from Africa is expected next week. Issuers seemed to be encouraged by the market’s reception of South Africa’s Sappi Papier Holding GmbH early in the week. The Johannesburg-based coated paper manufacturer priced €450 million of 3 1/8% seven-year notes on Tuesday after announcing the deal on Monday. The proceeds will be used to redeem all of the company’s outstanding €450 million senior notes due 2022.

After Sappier, Ghana announced a deal, and that sovereign’s bond curve tightened by 12 basis points to 14 bps, with the spectrum of African debt slightly tighter on the heels of news that the republic is in the market for a proposed U.S. dollar-denominated benchmark of medium-term duration.

The West African country of Benin also announced that it is planning to price a benchmark-sized offering of euro-denominated notes of up to an eight-year final maturity.

EM-focused Kosmos Energy Ltd. is also expected to price a $600 million offering of seven-year senior notes (expected ratings BB-/BB), which are non-callable for three years. Initial guidance has the offering coming with a yield in the 7% area, a bond trader said.

The Latin America primary was also active this week. On Thursday, EM-focused Millicom International Cellular SA priced an upsized $750 million issue of 10-year senior notes at par to yield 6¼%, and Banco do Brasil SA priced $750 million of five-year notes to yield 4¾%. On Wednesday Petroleo Brasileiro SA priced $3 billion of notes in two tranches.

Mexico’s Cemex SAB de CV priced €400 million of notes due 2026 at par to yield 3 1/8% on Tuesday. The coupon and yield matched talk. And Mexico’s Banco Mercantil del Norte SA (Cayman I), a branch of Banco Mercantil del Norte SA (Banorte), priced CHF 250 million 1.55% notes due 2022 (A3) on Thursday. The notes priced at 100.087 to yield 1.525%.

There was an expectation that Gulf Cooperation Countries will follow on Emirates NBD Bank PJSC’s $1 billion for additional tier 1 securities this week as this debt security offers attractive pricing for issuers.

Also next week, investors will be watching for updates from the U.S. Federal Reserve on Wednesday and from the Bank of England on Thursday. Both banks are expected to hold rates steady following their respective policy meetings.

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