Bulgaria, Sappi sell notes; softer day for EM; weakness in oil names; Russia, Brazil in focus

By Christine Van Dusen

Atlanta, March 15 – Bulgaria and South Africa’s Sappi Ltd. were among the issuers to print new notes on a softer Tuesday for emerging markets assets.

“Following weeks of steadily increasing or stable oil prices, the trend has started to reverse as a consequence of refreshed doubts on the tentative production freeze agreement,” a strategist said. “A meeting in March is now unlikely, but several OPEC delegates now see April as more likely and a renewed price drop will add further pressure to an assertive stance from OPEC and non-OPEC producers.”

Meanwhile, Iran has said it will boost crude output before stabilizing prices.

“There was definite weakness in oil-related names, and we had sellers across Kazakhstan and Azerbaijan,” a trader said.

Also contributing to the larger picture was the news that Russian President Vladimir Putin was withdrawing troops from Syria, saying that their objectives had been met.

“While some skepticism still remains, the move might add further pressure on the Syrian government and opposition groups to score a compromise in peace talks that are expected to become ‘substantive’ this week,” the strategist said. “So far, both sides seem to have reached a dead end.”

In other news from Russia, European officials have reportedly warned banks not to participate in a planned bond deal from the sovereign, he said.

“Officials said that the proceeds could be misused,” he said. “Russia previously said that it would proceed with its plans. This might now become more difficult if European banks also shy away.”

Lat-Am in focus

From Latin America, bonds were “overbought” on Tuesday, a New York-based trader said.

“We have had a pretty nice move lower, mostly in credits that have outperformed, like Vale SA,” he said. “[Cemex SAB de CV] has also given back some recent gains, with the new 2026s sliding all the way back to fixed reoffer, and below now.”

Brazil received attention on Tuesday, after President Dilma Rousseff named her predecessor to her cabinet and coped as a minister faced new allegations. In response, Brazilian bank bonds moved lower, a trader said.

Gerdau suffers

Meanwhile, Brazil-based Gerdau SA saw its bonds move lower as a result of its “tough” fourth quarter, a trader said.

“Buying has abated, and there has been some light selling,” he said. “Braskem has held in, for the most part.”

Banks from Colombia held in too, he said, and high-grade bonds from Mexico “tailed off a bit after being on fire the last few weeks,” he said. “Amazing what a little global weakness can do to a charged-up Lat-Am fixed asset picture.”

South Africa underperforms

Looking to South Africa, bonds underperformed, another trader said.

“Wider markets are also in holding pattern as we approach the Fed this week,” he said. “Accounts are in wait-and-see mode.”

Flows increased in the afternoon and remained two-way, he said, “but the selling did pick up as fast money looked to hit good bids in a softening market.”

Egypt’s 2025s saw some buyers, who pushed the curve another 20 basis points tighter.

Investors cut risk

From Turkey, long-dated bonds underperformed “as the Street sold risk and tried to cut risk as we soften,” the trader said.

“Turkey banks showed some signs of weakness, but overall it’s holding in well versus the sovereign, as we lacked any real selling in the space,” he said. “Front-end bonds are feeling very well bid again, steepening up bank curves.”

And bonds from Pakistan were softer on Tuesday, along with the overall tone, but flows were two-way, he said.

Bulgaria sells notes

In its new deal, Bulgaria priced a two-tranche issue of €1.99 billion issue of notes due 2023 and 2028, a market source said.

The €1.14 billion 1 7/8% notes due 2023 priced at 98.192 to yield mid-swaps plus 185 bps.

The €850 million 3% notes due 2028 priced at 98.237 to yield mid-swaps plus 235 bps.

BNP Paribas, Citigroup, JPMorgan and UniCredit were the bookrunners for the Regulation S deal.

Sappi does deal

South Africa-based Sappi priced a €350 million issue of seven-year senior secured notes at par to yield 4% on Tuesday, according to a market source.

The yield printed at the tight end of the 4% to 4¼% yield talk.

Timing on the deal was accelerated. Dealers cut short a roadshow that was scheduled to carry into Wednesday.

Global coordinator Citigroup will bill and deliver. Credit Agricole CIB and JPMorgan were also global coordinators. Erste, KBC, Royal Bank of Scotland, Standard Chartered Bank and UniCredit were joint bookrunners.

The Johannesburg-based coated paper manufacturer plans to use the proceeds to refinance $350 million of 6 5/8% notes due April 2021.

Axiata sets talk

In other deal-related news, Malaysia’s Axiata Group Bhd. set talk in the Treasuries plus 260-bps area for a dollar-denominated issue of benchmark-sized Islamic bonds due in 10 years, a market source said.

CIMB, Deutsche Bank and HSBC are the bookrunners for the Regulation S deal.

Axiata is a Malaysian telecommunications provider based in Kuala Lumpur.

Carnival Group gives guidance

China’s Carnival Group International Holdings Ltd. set talk at 8% for a dollar-denominated issue of benchmark-sized notes due in three years, a market source said.

AMTD, CCB International, Haitong International and Quam Securities Co. Ltd. are the bookrunners for the Regulation S deal.

The proceeds will be used for general corporate purposes.

Carnival Group is a Hong Kong-based investment holding company that designs and develops tourist complexes in China and elsewhere that include theme parks, hotels, stores and leisure facilities.

Paul A. Harris contributed to this article.

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