Emerging Markets: Russia’s invasion of Ukraine rattles investors; primary pauses

By Rebecca Melvin

Concord, N.H., Feb. 22 – A full scale Russian invasion of Ukraine this week came hard on the heels of the Biden administration’s dire warning of the same only days before, catching many by surprise and prompting sweeping condemnation by many world leaders and organizations.

Ukraine reported more than 100 people were killed in the initial incursion as a Ukraine armed forces blew up a bridge near Kyiv to stop Russian troops from moving into the capital city, sanctions were imposed on Russia and global oil prices surged above $100 a barrel.

Fixed-income investors responded by continuing to pull investments out of bond funds and left the U.S. high-yield and emerging markets primary bond markets on hold with little to no issuance pricing this past week. Investors pulled money out of bond funds for the seventh straight week, the longest such run since the fourth quarter of 2018, according to an EPFR note on Friday.

In primary market activity, market sources said the Republic of Chile is planning an offering of dollar- and euro-denominated sustainability-linked notes.

The euro notes are anticipated to have a maturity around 15 years, and the U.S. dollar notes are anticipated to have a maturity around 20 years, according to a market source on Tuesday.

BNP Paribas, Credit Agricole CIB and Societe Generale were mandated to organize a series of fixed-income investor meetings in the United States and Europe commencing on Wednesday, with notes to price subsequently subject to market conditions.

Bolivia was seen fixing final terms on $850 million of bonds due March 2, 2030. The notes have a coupon of 7˝%, and proceeds were expected to be used for general budgetary purposes and a concurrent liability management operation involving buying back bonds.

In local currencies, Bancolombia SA announced it plans to price a public offering of sustainable ordinary bonds totaling COP 800 billion.

The bonds will be offered in three subseries with maturities of two, five, 10 and 15 years.

This will be the bank’s second issue of sustainable ordinary bonds and the second issue under its COP 3 trillion issuance program that covers ordinary bonds, green bonds, social bonds, sustainable bonds, orange bonds and subordinated bonds.

Proceeds from the sustainable bonds will be used to finance projects that meet certain eligibility criteria relating to renewable energy, energy efficiency, sustainable construction, circular economy, affordable housing, social infrastructure and empowerment of women.

The lender is based in Medellin, Colombia.

In Estonia, the lender Coop Pank AS was offering up to €8 million 5% subordinated bonds due March 10, 2032 (ISIN: EE3300002542), according to a company news release.

There is a greenshoe of up to €2 million if the offering of series 11 notes is oversubscribed. The offering may also be canceled if it is undersubscribed.

The bank priced €10 million of its series I bonds last year. The new deal is being priced under the bank’s bond program as amended and supplemented on Feb. 21.

The subscription period will end at 10 a.m. ET on March 3, and the bonds are expected to be listed on the Baltic Bond List of the Nasdaq Tallinn Stock Exchange on March 14.

The lender is based in Tallinn.

But the emerging markets primary market was nearly silent otherwise, including China, which is a rare event. Deal pricing emerging from China this past week was from earlier in the month. For example, Beijing State-owned Capital Operation and Management Center Investment Holdings Ltd.’s €1 billion of 1.206% guaranteed notes due 2025 (A1/A+) priced at par on Feb. 16, according to a listing notice with an appended offering circular on Thursday.

But aside from a pause in primary action, the Russia-Ukraine situations sparked markets turbulence with wild swings in global equities. The Dow Jones industrial average on Friday posted a more than 800-point gain, representing a climb of 2.5%, its biggest single-day jump since November 2020. It was day two of a rally presumably prompted by hopes pinned on talks with Ukraine’s leaders that Russian President Vladimir Putin has agreed to attend in Belarus and also by the likelihood that the geopolitical uncertainty may curb the Federal Reserve’s imminent rate hiking cycle aimed at limiting further gains in inflation.

© 2015 Prospect News.
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