Primary hosts Turkey, Guatemala, others; equity fall puts pressure on EM; Lat-Am spreads widen

By Christine Van Dusen

Atlanta, April 28 – Turkey, Guatemala, Greece’s Black Sea Trade and Development Bank, Poland’s Bank Gospodarstwa Krajowego, China’s Huawei Investment & Holding Co. Ltd. and Banque Ouest Africaine de Developpement sold notes on a turbulent Thursday as equities plummeted on weaker-than-expected economic data from the United States and news that the Bank of Japan would maintain its current easing program.

In trading, Latin American global risk assets indeed ran into some “turbulence” on Thursday, with the rally fading and turning into a selloff, a New York-based trader said.

“Coming in this morning, Lat-Am external credit was holding its own and was quite firm, but contagion from equity weakness finally hit EM bonds this afternoon,” he said.

Brazil’s five-year credit default swaps spreads closed at 340 basis points from 333 bps after trading as tight as 332 bps earlier in the day. Mexico’s closed at 158 bps from 152 bps after trading at 151 bps.

“Cash prices initially rallied but turned lower despite the rally in U.S. Treasuries as spread widening proved too much,” he said. “Latin American high yield finishes mixed on the day.”

Argentina’s Bonar 2024s ended at 113.25 from 113.50, while its 2026s closed at 101.65 from 102.45. Venezuela’s 2027s closed at 43 from 41.50, and PDVSA’s 2017s finished at 58 from 56.

“Good two-way flows for the session with not a whole lot of conviction from inquiries we saw,” he said. “With BOJ disappointing markets, we are now left to wonder if the only catalyst that can propel markets higher from here is additional central bank stimulus. The economic backdrop is evidently not enough to keep this rally going.”

Middle East in focus

Trading of bonds from the Middle East was “a little less frantic” on Thursday than it had been earlier in the week, a London-based trader said.

Abu Dhabi remained active, with its long bonds still outperforming.

“Hard to see that changing, as there remains very good demand for the 10-year,” he said. “Secondary spreads did open a little wider despite firm prices, as we could not keep up with the U.S. Treasury rally overnight, post-FOMC.”

Spreads improve

Spreads from the Middle East closed out the day better than where they started, as Treasuries moved back to 1.865%, he said.

“Long-dated bonds are still popular, with the Bahrain 2044 near 80, Dubai 2043 near 93 and Saudi Electricity Co. rallying at the long end still,” he said.

Abu Dhabi National Energy Co., which had been “very heavy” on Wednesday, closed out Thursday 5 bps to 13 bps tighter.

“I suspect May is likely to be quite busy,” he said.

Turkey does tap

In its new deal, Turkey priced a $1.5 billion tap of is 6 5/8% notes due Feb. 17, 2045 at 117.781 to yield 5.4%, according to a report filed by the sovereign and a market source.

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 bps.

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

“It was a tap instead of a new 2046, which kept some shorts pretty happy, given how squeezed the 2045s had become,” a trader said. “The 2045s had traded inside the 2043s for the last year even though you pay up plenty of cash and add two years of duration.”

Issuance from Guatemala

Guatemala sold $700 million 4½% notes due May 3, 2026 at 99.206 to yield Treasuries plus 277.6 bps, a market source said.

BofA Merrill Lynch was the bookrunner for the Rule 144A and Regulation transaction.

The proceeds will be used to pay interest and principal on outstanding debt obligations and to finance social and investment programs and capital expenditures.

BOAD prices bonds

Banque Ouest Africaine de Developpement (West African Development Bank, or BOAD) sold $750 million 5½% notes due May 6, 2021 at 98.927 to yield Treasuries plus 443.4 bps, a market source said.

BNP Paribas, Deutsche Bank, JPMorgan and Standard Bank were the bookrunners for the Rule 144A and Regulation S deal.

The lender is based in Lome, Togo.

BGK sells notes

Poland’s Bank Gospodarstwa Krajowego (BGK) sold €500 million 1¾% notes due May 6, 2026 at 99.158 to yield 1.843%, or mid-swaps plus 120 bps, a market source said.

BNP Paribas, HSBC and Societe Generale CIB were the bookrunners for the Regulation S deal.

The notes are guaranteed by the State Treasury of the Republic of Poland.

The bank is based in Warsaw.

Black Sea Trade does deal

Greece’s Black Sea Trade and Development Bank priced $500 million 4 7/8% notes due May 6, 2021 at 99.27 to yield Treasuries plus 375 bps, a market source said.

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

The company is a financial and development institution based in Thessaloniki.

Huawei prints bonds

China’s Huawei Investment & Holding printed a $2 billion issue of 4 1/8% notes due May 6, 2026 at 99.716 to yield Treasuries plus 230 bps, a market source 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.

© 2015 Prospect News.
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