Mexico Airport bonds jump as EM debt moves mostly lower as equities tumble; Indonesia, CDC, Baidu price

By Rebecca Melvin

New York, Dec. 4 – Mexico City Airport bonds jumped on Tuesday when much of the emerging markets debt space was moving lower amid a plunge in equities and bid in U.S. Treasuries.

The sharp move lower in equities, which saw the Dow Jones industrial average slide almost 800 points, or 3% on the day, was generally believed to be related to fears of slowing global growth and doubts over the U.S.-China trade truce.

Meanwhile, the Treasury yield curve flattened further, with two- and three-year note yields rising above five-year debt to mark an inversion, and the spread between yields on the two- and 10-year Treasuries narrowed to a level last seen in 2007.

Nevertheless, the Mexico City Airport bonds lifted after the Mexican government announced a buyback for up to $1.8 billion of the bonds, asking holders for submission of four different series of notes through a modified Dutch auction for $900 to $1,000 for every $1,000 in principal.

Mexico’s new president, Andres Manuel Lopez Obrador, announced in October that he did not plan to complete the airport for which $6 billion of bonds had already been issued.

Mexico City Airport’s 5½% bonds due 2047 were up at 83.95, a gain of nine points, or 12%, from 74.88 on Monday. The notes initially spiked at 86, which was still lower than the issue was prior to AMLO’s announcement in October at around 88.

The Mexico City Airport 3 7/8% notes due 2028 were at 84.12, which was up six points or nearly 8% on the day. Those bonds had dropped to as low as 77 recently after falling from around 90 on the heels of AMLO’s cancellation news.

But the bonds of Petroleos Mexicanos SAB de CV were lower with the Pemex 6½% notes due 2027 down about 1.5 points to 94.

On the new issue front, Trinidad & Tobago gas to liquids plant operator NiQuan Energy Trinidad Ltd. was scheduling fixed-income investor meetings for a potential dollar senior secured notes deal.

Meetings are being arranged by Oppenheimer and Republic Bank and are slated to wrap up around Dec. 13.

Details emerged on the Republic of Indonesia’s new $3 billion of notes in three tranches due 2024, 2029 and 2049.

The $750 million issue of 4.45% bonds due 2024 priced at 99.852 to yield 4.48%, or a reoffer yield of 165.9 basis points over U.S. Treasuries.

The $1.25 billion issue of 4¾% bonds due 2029 priced at 99.748 to yield 4.78%, or a spread over U.S. Treasuries of 180.8 bps.

The $1 billion of 5.35% notes due 2049 priced at 99.539 to yield 5.38%, or a spread over U.S. Treasuries of 212.1 bps.

China Development Bank launched $1.5 billion in three-year and five-year floating-rate notes and €500 million of four-year fixed-rate notes on Tuesday, according to a syndicate source. Final pricing was expected later in the session.

A $1 billion tranche of three-year notes launched at three-month Libor plus 63 bps, which was trimmed from initial price talk at Libor plus 85 bps.

The $500 million of five-year notes launched at three-month Libor plus 73 bps, and that pricing was cut from initial talk at Libor plus 95 bps.

The €800 million four-year notes launched at mid-swaps plus 60 basis points, which was trimmed from initial talk at mid-swaps plus 75 bps.

Beijing-based web services company Baidu Inc. priced a $250 million add-on to its 4 3/8% senior unsecured notes due 2024, according to a Securities and Exchange Commission filing.

The new notes priced at 99.725 to yield 4.432%, or 1.625% over U.S. Treasuries. Baidu’s original $600 million of 4 3/8% notes priced on Nov. 9 at 99.802 to yield 4.416%.

Back in the broader markets, the S&P 500 stock index fell below its 200-day moving average, and closed down 3.2% on the day. The DJIA fell 3.1% to 25.027.00, closing near their session lows. And the tech-heavy Nasdaq Composite slid 3.8%.

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