Turk Telecom mulls issuance; high-rated Lat-Am sovereigns outperform; spreads widen again

By Christine Van Dusen

Atlanta, Aug. 20 - Selling outpaced buying of emerging markets assets and some Ukrainian corporate bonds experienced demand on Tuesday amid wider spreads and light flows.

Against this backdrop, Ankara-based telecommunications company Turk Telekom was considering an issue of eurobonds, a market source said.

"A nervy start in the market this morning following continued concerns regarding the Indian economy and further declines in the rupee, although we are bouncing back a little this morning," a London-based analyst said. "Yesterday saw extremely light flows as the summer lull peaks this week."

U.S. Treasuries were better on Tuesday, with the 10-year at 2.81% in the morning and later at 2.82%.

"But emerging markets spreads are giving in to the wider weakness," she said. "Spreads, for the most part, are struggling."

The Markit iTraxx SovX CEEME ex-EU index spread on Tuesday opened at 260 basis points over Treasuries, wider by 15 bps from Monday. The Markit iTraxx Crossover index spread - seen Monday at 416 bps - moved out to a 427 bps spread on Tuesday.

"Turkish sovereign cash is 10 bps wider, and Russia also weaker," the analyst said.

The latter sovereign's 2030s were 4 bps wider on Tuesday.

"The Middle East and North Africa are generally 3 bps to 5 bps wider, but activity continues to be muted overall," she said.

The market saw more sellers than buyers of Middle Eastern bonds, a London-based trader said, particularly among names like Dubai Electricity and Water Authority, Dubai and Bahrain.

"Bahrain's 2023s moved to high-98 handle, or 10 bps wider on the day and week," he said. "Batelco went through between 92 and 923/4."

Still, some short-dated bonds held in well, he said. But liquidity remained dire.

"So we await Sept. 3, I suspect, before even a semblance of liquidity returns," he said.

Recovery seen for some Lat-Am

From Latin America, sovereign bonds on Tuesday recovered from some of the previous session's widening, a New York-based trader said.

Higher-rated credits fared best and Venezuela and PDVSA underperformed.

"Venezuela's 2027s trade at 833/4, PDVSA's 2017s at 91," he said. "Volumes remain light and account activity was better sell-side driven."

Ukraine sovereigns pressured

Bonds from Ukraine have remained under pressure so far this week, said Svitlana Rusakova of Dragon Capital.

The sovereign's 2020s to 2023s have been spotted down about a point, she said.

"There is conspicuously little liquidity, which has been helping prices to stay calm, but this may change quickly if sellers come out in size," she said.

Demand was noted for State Export-Import Bank of Ukraine's (Ukreximbank) 2018s, Ferrexpo plc's 2016s and Mriya Agro Holdings' 2018s.

Though most corporates have been faring better than the sovereign, OJSC Oschadbank's 2018s "continued to sink," she said.

Perpetuals move down

Looking to the Middle East, the perpetual notes from Abu Dhabi Islamic Bank that opened Monday at 99½ bid, 100½ offered closed Tuesday at 99.37 bid, 100.37 offered, a trader said.

The notes priced at par.

Dubai Islamic Bank's perpetuals, which also priced at par, moved to 95½ bid, 96½ offered after Monday's levels of 96 bid, 97 offered.

Sharjah up from reoffer

The 2.95% Islamic bonds due 2018 that United Arab Emirates' Sharjah Islamic Bank priced at par traded Tuesday at 94 bid, 943/4, a trader said.

Al Hilal Bank, HSBC, Kuwait's Liquidity Management House and Standard Chartered Bank were the bookrunners for the Regulation S deal.

And two-way activity was seen for African Export-Import Bank's (Afreximbank) 2016s within the 104¾ to 105¾ context, he said.

Nigeria unchanged or lower

In other trading from Africa, Nigeria's recent $500 million 5 1/8% notes due 2018 traded Tuesday at 101.62 bid, 102.62 offered, unchanged from Monday.

The notes priced at 98.917 to yield 5 3/8%.

The second tranche of that same deal - $500 million 6¾% notes due 2023 - was quoted Tuesday at 101.62 bid, 102.87 offered after Monday's levels of 106¼ bid, 107½ offered.

The notes priced at 98.193 to yield 6 1/8%.

Afreximbank in focus

Cairo-based Afreximbank saw its issue of 5¾% notes due 2016 trade Tuesday at 104¾ bid, 106¼ offered, a trader said.

On Monday the notes were quoted at 105.62 bid, 106.62 offered.

The notes priced at par via Commerzbank, HSBC, Mitsubishi UFJ Securities and Standard Bank in a Regulation S deal.

Morocco notes dip

Morocco 2022 notes, which priced at 100.263, moved to 86¼ bid, 87¾ offered after trading on Monday at 86¾ bid, 88¼ offered.

The sovereign's 5½% 2042 notes traded Tuesday at 80½ bid, 82½ offered.

On Monday the notes were seen at 81 bid, 82½ offered after pricing at 97.464.

Barclays, BNP Paribas, Citigroup and Natixis were the bookrunners for the Rule 144A and Regulation S deal.

Turk Telecom could issue notes

Ankara-based telecommunications company Turk Telekom is looking at the possibility of pricing an issue of eurobonds, a market source said.

"The company has 973 million Turkish lira of debt maturing in the next 12 months, and with only 973 million Turkish lira of cash and cash equivalents, it is unsurprising they are looking to raise funds," the London-based analyst said. "We await further details on the story but see this as an exciting potential addition to the Turkish bluechip corporate universe."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.