EM sovereigns weaker as Treasuries sell off; Mexichem launches deal; Saudi notes in focus

By Rebecca Melvin

New York, Sept. 27 – Selling hit emerging markets on Wednesday particularly among some of sovereign curves as U.S. Treasuries sold off, according to market sources.

In the primary space, investors eyed a $1 billion launch of notes from chemical company Mexichem SAB de CV. That paper in 10- and 30-year tranches (expected ratings: Baa3/BBB-/BBB) was expected to be released for trade on Thursday.

Meanwhile, the existing notes of the Tlalnepantla, Mexico-based company were quiet on Wednesday. Among Mexichem’s existing notes are its 4 7/8% notes due 2022, 6¾% notes due 2042 and 8¾% notes due 2019. But that paper “never traded that much,” a trader said.

The Middle East and Africa region was active early Wednesday as investors eyed the launch of Saudi Arabia’s $12.5 billion of five-, 10- and 30- year notes, which priced late in the day, according to a market source.

The addition of these notes will take the Saudi “secondary curve to a cool $39 billion,” another source said.

There was mixed performance in the Saudi secondary market ahead of pricing of the new notes, with the 2022 and 2027 sukuk outperforming the conventional bond curve, a trader said. Also the new 2028 notes, with pricing seen at U.S. Treasuries plus 145 basis points, makes the 2027 notes look very rich, the source said.

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