EM starts strong, then sees some prices slip; Lat-Am bonds slow down; Turkey outperforms

By Christine Van Dusen

Atlanta, March 21 – Emerging markets assets remained strong on Monday morning – even with Japan out on holiday and the United States looking ahead to the Easter weekend – but in the afternoon saw some weakness alongside U.S. Treasuries.

Trading of Latin American bonds was slow on Monday, with the market “looking for conviction to grind higher,” a New York-based trader said.

“So far, bids seem just as strong, if not stronger” than on Friday, he said. “Interesting to note is the few inquiries so far have been client sells, and mixed inquiries in [Colombia’s Ecopetrol SA], a few institutional sellers and one buyer.”

He also saw some institutional sellers of Mexico-based Cemex SAB de CV’s bonds.

“Will keep a close eye on the beginning of a trend here, after such a strong and continuous run higher,” he said. “We also did see more selling on Friday than previous sessions, although overall there was still better buying.”

Trading remained quiet later in the day, with spreads tightening but many prices declining, another New York-based trader said.

“Brazil does jump late in the day on numerous news headlines and has credit default swaps tightening in to 372 basis points from 343 bps,” he said.

The sovereign has seen a lot of turmoil during the past week, with large protests and impeachment hearings for the president amid accusations of corruption.

Mexico’s five-year credit default swaps spreads closed Monday at 158 bps from 141 bps, he said.

“Cash prices away from Brazil felt a bit soft throughout the session, and it’s likely attributable to U.S. Treasury weakness and low volumes,” he said.

Venezuela, Argentina higher

Some high-yield names from Latin America finished Monday a bit firmer, the trader said, with Venezuela’s 2027s up at 43.25 from 42.50 and PDVSA’s 2017s at 54 from 53.50.

Argentina’s Bonar 2024s finished the day at 108.625 from 108.35.

“Volumes on the lighter side today, with better sellers in small size, from the inquiries we saw,” the trader said. “Not much in the way of a catalyst this week for global markets, and with a holiday-heavy calendar as well, volatility will likely be kept in check.”

Demand for Turkey

Meanwhile, bonds from Turkey were very strong, even after the bombing in Istanbul, another trader said.

“Good demand across the curve, and fast money is squeezing up the long end of the curve,” he said.

Turkish banks were also trading well on Monday, he said.

“I think the [Akbank TAS] curve has richened a bit too much here versus peers,” he said. “Corporates have now started to perform and present an asymmetric risk and reward opportunity versus bank paper, in my view. And the tighter we get in banks, the probability of an opportunistic senior deal increases, especially with five-year bank bonds nearly trading inside 5%.”

Isbank sees selling

Turkey’s Turkiye Is Bankasi AS (Isbank) remained in focus following news that a prosecutor will seek a sentence of between 8˝ and 24˝ years in prison for the company’s chairman if he is convicted of fuel smuggling.

In response to that, and “some negative rhetoric of taking the bank public,” a seller was seen, a trader said.

Azerbaijan gets attention

Bonds from Azerbaijan and South Africa were trading “OK” as buyers continued to surface, another trader said.

The new issue from Azerbaijan’s Southern Gas Corridor CJSC – $1 billion 6 7/8% notes due 2026 that priced at 99.112 to yield 7%, or Treasuries plus 509.7 bps – moved up to 100 on Friday and was fairly active on Monday, he said.

Citigroup, JPMorgan and UniCredit were the bookrunners for the Rule 144A and Regulation S deal.

“We think it looks cheap here versus other oil credits,” he said.

Pakistan 2019s well-bid

Looking to Pakistan, the sovereign’s 2019s remain well-bid, but buyers are “becoming price-sensitive,” a trader said.

“Pakistan’s 2016s mature at the end of the month,” he said. “That may force some more buying up the curve, but it will most probably be small, as locals seem to have already done most of that trade now.”

B&N Bank guides LPNs

Russia’s B&N Bank set talk at 8˝% for up to $200 million of loan participation notes due in three years, a market source said.

SC Lowy and Xiaxin Securities are the bookrunners for the deal.

The lender is based in Moscow.

© 2015 Prospect News.
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