China Merchants, Brazil’s Votorantim bring deals to primary; Cnooc, Sinopec trade wider

By Aleesia Forni and Christine Van Dusen

Atlanta, May 7 – China Merchants Bank Co. Ltd. and Brazil’s Votorantim Cimentos SA were in Thursday’s primary market selling new issues.

Though Asian credits started the session on firm footing, that changed as U.S. Treasuries sold off after the London open, a London-based trader said.

“High-grade cash closed the day 1 basis point to 3 bps wider,” he said. “New issues took most of the hit.”

He pointed to China-based Cnooc Ltd.’s new 3½% 2025 notes, which traded down to a wide of 147 bps before closing 3 bps wider at 158 bps bid, 155 bps offered. The notes priced in April at 99.075 to yield Treasuries plus 160 bps.

The company’s 2 5/8% 2020s – priced at 99.716 to yield Treasuries plus 128 bps – were seen on Thursday at 127 bps before ending the day at 129 bps bid, 126 bps offered.

And the new 4.2% 30-year notes were unchanged from the day before, he said, at 150 bps bid, 142 bps offered. They priced at par to yield 149.6 bps.

China Petrochemical & Chemical Corp. (Sinopec Group) saw its 3¼% notes due in 2025 trade between 141 bps and 144 bps before closing at 146 bps bid, 143 bps offered, wider by 3 bps. The notes priced at 99.022 to yield 145 bps.

Sinopec’s 3¼% 10-year notes that priced at 99.022 to yield 145 bps traded at 120 bps on Thursday before closing at 122 bps bid, 119 bps offered, about 1 bp wider than on Wednesday.

The new issue two-tranche issue of notes from China’s Kunlun Energy Co. Ltd. received some attention in trading on Thursday.

The company priced $500 million of 2 7/8% senior notes due 2020 at 99.557 and $500 million of 3¾% senior notes due 2025 at 99.013.

“It held very firm in the sell-off,” a trader said.

Treasuries rally later

As the New York session got underway, Treasuries rallied by about 10 bps, another trader said.

That brought out buyers for Middle Eastern bonds, he said, particularly from Saudi Electricity Co., Bahrain and Dubai.

“Ticking higher,” he said.

Chinese bank bonds get flipped

The new notes from China Construction Bank (Asia) Corp. Ltd. – $2 billion 3.996% notes due in 2025 that came to the market at 99.456 to yield Treasuries plus 242.5 bps – traded to a tight of 234 bps before moving to 238 bps as accounts flipped, a trader said.

“Real-money accounts topped up in the secondary but failed to support the market,” he said. “China financials were calmer.”

Turkish bonds tighten

Looking to Turkey, core rates remained under pressure on Thursday, leading sovereign bonds to close about 6 bps tighter across the curve, a London-based trader said.

“I do expect duration to feel offered until we get [U.S. non-farm payrolls] out of the way,” he said. “Flows were relatively muted, but we saw better demand for the belly of the curve from retail accounts.”

Investors seem to have taken a break from selling Turkey’s long-end bonds, he said.

Votorantim Cimentos sells notes

The primary market hosted Brazil’s Votorantim Cimentos, which sold €500 million of 3½% seven-year notes (Baa3/BBB/BBB) in line with talk at mid-swaps plus 310 bps, a market source said.

Citigroup, Deutsche Bank, HSBC, Banco Votorantim, BB Securities, BofA Merrill Lynch, MUFG and Santander GBM are the bookrunners for the Rule 144A and Regulation S deal.

Votorantim Cimentos is a cement company based in Sao Paulo.

China Merchants new issue

In other new issue activity on Thursday, China Merchants sold $500 million of 2 3/8% senior notes (Baa1/BBB+/BBB) at Treasuries plus 147.5 bps, an informed source said.

The notes sold at 99.684 to yield 2.485%.

Guidance was set in the area of Treasuries plus 50 bps. Initial talk was set talk in the Treasuries plus 170 bps area.

BofA Merrill Lynch, Citigroup, HSBC, CMB International, UBS, ANZ and Wing Lung Bank are the bookrunners for the Rule 144A and Regulation S deal.

China Merchants Bank is based in Shenzhen, China.

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