Israel prices $2 billion notes; Rumo, Interbank price; market eyes rates, NAFTA talks

By Rebecca Melvin

New York, Jan. 10 – Israel priced $2 billion of notes in a two-tranche deal on Wednesday, and from Latin America Rumo SA priced $500 million of notes to yield 6% and Banco Internacional del Peru SA (Interbank) priced $200 million of five-year notes to yield 3.389%; but several deals expected to price on Wednesday were left on the calendar.

Emerging markets were weighed down initially on Wednesday by a bump up in U.S. Treasury rates that dampened demand for the emerging markets space early in the day. And worries regarding negative reports on the North America Free Trade Agreement late in the session rocked the Latin America region after Treasuries had recovered.

One deal that did not seem to get priced was that of Mexican auto parts maker Nemak SAB de CV, which is on the calendar for a Rule 144A and Regulation S dollar deal.

“I don’t think Nemak has announced initial price talk, and after the news or rumors on NAFTA it might not even come any time soon,” a New York-based market source said.

The news on NAFTA was that Canadian sources are becoming more convinced that U.S. President Donald Trump plans to pull out of NAFTA as negotiations appear to be at a stalemate. The reports sent the Mexican and Canadian currencies lower.

There have been five rounds of talks to modernize the 1990s era trade agreement between Mexico, the United States and Canada. But so far no significant changes have been made as proposals put forward by the United States have gained no buy-in from Canada and Mexico. Now negotiators are slated to meet Jan. 23-28 for the sixth of seven planned rounds of talks.

Among U.S. proposals that Canada and Mexico have rejected are rules to establish the origin of goods that would set minimum levels of U.S. content for autos, a sunset clause that would terminate the trade deal if it is not renegotiated every five years and ending the so-called Chapter 19 dispute mechanism.

U.S. Treasury prices recovered early losses, which had sent yields up to 2.58% for the benchmark 10-year notes, marking nearly a 52-week high. But the recovery left prices unchanged and the 10-year yield at 2.555%, which was unchanged for the day.

That is still higher than where yields have been of late, a climb attributed to improving economic data and the prospect of inflation.

But one market source said late Wednesday, “Rates didn’t weigh on the markets. In fact, Treasuries recovered after an auction, ending in positive territory.”

Israel prices $2 billion notes

The 10- and 30-year senior unsecured notes priced by Israel on Wednesday included $1 billion of 3¼% notes due 2028 and $1 billion of 4 1/8% notes due 2048.

The 2028 notes priced at 99.291 of par for a yield of 3.334%, or a spread of U.S. Treasuries plus 75 basis points. Final pricing was set 15 bps below talk.

The 2048 notes priced with a 4 1/8% coupon at 99.098 to yield 4.178%, or a spread of Treasuries plus 125 bps. That pricing was 20 bps below talk for a yield in the area of Treasuries plus 145 bps.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC were the bookrunners of the global bonds.

Proceeds will be used for general purposes of the state, which may include refinancing domestic and external debt of Israel.

Rumo deal yields 6%

Rumo’s $500 million of 5 7/8% seven-year notes priced at 99.294 of par to yield 6%, which came tight compared to talk in the low to mid 6% range.

BB Securities, BofA Merrill Lynch, Bradesco, Citigroup, Itau and Santander were bookrunners for the Rule 144A and Regulation S notes.

Proceeds are earmarked for prepaying debt at the company’s operating subsidiaries, mainly Rumo Malha Norte, as part of the company’s liability management plan.

Rumo is a railroad and logistics operator in the Brazilian infrastructure industry.

Interbank prices notes

Peru’s Interbank priced $200 million of 3 3/8%, five-year notes (expected ratings Baa2//) on Wednesday at 99.936 of par to yield 3.389%, or a spread of Treasuries plus 105 bps, according to a market source.

The Rule 144A and Regulation S notes were priced via bookrunners J.P. Morgan and Bank of America Merrill Lynch.

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