Middle East & Turkey
International bond issues in the Gulf region may hit a second straight record year as continued low oil price pushes impede banks financing capacity and push governments to issue more debt in order to keep budget deficits under control. According to Reuters, issuance data shows the six-nation Gulf Cooperation Council's bond market is on track to become more important than its syndicated loan market in a region traditionally dominated by bank lending. The shift is expected to lower liquidity pressures and drive more foreign investors to the GCC bond market.
Saudi and Russian officials are due to meet in coming days to discuss the option of extending the current oil output cuts set by OPEC for another stretch. Saudi Minister of Energy and Industry Khalid Al-Falih and his Russian counterpart Alexander Novak. "There seems to be a consensus in that direction, but we’re not 100 percent there,” Al-Falih told reporters Wednesday after meeting Azeri Energy Minister Natiq Aliyev in Baku. “We still need to talk to all countries. A very important country to talk to, of course, is Russia, the biggest non-OPEC exporter.” According to observers, Russia remains one of the main threats to the cartel as it has failed to hit its target of reducing oil inventories below the five-year historical average. The final decision is expected to be made at a meeting in Vienna on May 25, Bloomberg reported.
Turkey's Ziraat Bank priced a US$600mn bond maturing 2022 this week. The notes priced at 99.457% to yield 5.25%. Bank of America Merrill Lynch, Citigroup, Emirates NBD, Erste Group, and JP Morgan managed the trade.
Turkey’s central bank increased the late liquidity window rate by 50 bps to 12.25%, giving it additional flexibility in case of future pressure on the lira. This is the rate used for about 90% of recent funding to commercial lenders, while it kept its one-week repo, overnight lending and borrowing rates unchanged.
The European Union should formally suspend Turkey's long-stalled talks on membership if it adopts constitutional changes backed at a referendum last week, a leading member of the EU parliament responsible for dealings with Ankara said on Wednesday, quoted by Reuters. Kati Piri said ahead of a plenary debate on the matter that if President Tayyip Erdogan implemented his new charter, giving him even more powers, Turkey would close the door on membership. Erdogan said on Tuesday that Turkey would not wait forever to join the bloc, just a day after the EU executive's top official for membership talks asked Europe's foreign ministers to consider other types of ties with Turkey when they meet on Friday.
The Hashemite Kingdom of Jordan has started marketing a tap of up to US$500m of its US$500mn bond due January 29, 2026 at 6%-6.125% area, according Reuters. The issuer is rated B1 by Moody's and BB- by S&P and the transaction is coordinated by Citigroup and JP Morgan.
Africa
South Africa's Competition Tribunal has agreed a SAR69.5mn (US$5.25mn) settlement with Citibank for its role in rigging rand currency trading, making the U.S. bank the first among more than dozen banks named in a probe. The fine is less than 10% of Citibank's annual revenue in South Africa – the penalty originally demanded by the government - because the bank is one of two co-operating with anti-trust authorities' investigating arm, the Competition Commission.
Ghana’s economy expanded at the slowest pace in 26 years in 2016 as a shutdown at oil and gas fields weighed on output. The growth of gross domestic product in West Africa’s second-largest economy slowed to 3.5%last year, from 3.9 percent in 2015, Baah Wadieh, the country’s statistics office announced on Wednesday. That is the lowest rate since 1990, according to data from the International Monetary Fund, and below a government forecast of 3.6%.
Tunisia raised its benchmark interest rate to the highest level in about 18 months, as the government looks to prevent further drops in the dinar and implement reforms under a IMF loan program. The regulator raised the key rate by 50bp to 4.75%, bank spokesman Zied Mouhli said this week. The move was the first change to the rate since the end of October 2015, and came shortly after an IMF mission visit this month aimed at finalizing a review of Tunisia’s loan program. Recently the dinar slumped 5.4% against the dollar and 7.4% against the euro -- the currency of its main trading partners -- since the IMF said April 17 that the nation should adopt a more flexible exchange rate, trading at 2.5 to the dollar on Wednesday.
Ivory Coast plans to issue at least US$1bn in Eurobonds by the end of July to raise funds for infrastructure projects, the country’s first issuance of international debt since 2015, according to Bloomberg. The bonds are set to carry a 10-year maturity and the sale will occur between the months of June or July. The sovereign has yet to hire the banks that will act as financial advisors but the roadshow will be held in London and US.
Nigeria's Senate President, Bukola Saraki, is calling on the government to fast track a US$300mn malaria bond. Proceeds from the bond will be used for malaria prevention through the Innovative Financing for Malaria Prevention and Control Project (IMPACT).
In its first day of offering foreign exchange to investors and exporters, Nigeria's Central Bank sold US$25mn on Tuesday in a bid to boost liquidity in the FX market. According to Reuters, the Central Bank also sold US$96.37mn in currency forwards in a bid to help narrow the spread between the official and black market rates for the naira.
Americas
Odebrecht SA creditors have agreed not to use any of the proceeds from the divestment of its water and sanitation unit to pay back early loans, the company said this week. The embattled Brazilian construction firm said creditors have allowed it to keep the BRL2.5bn netted from the sale to bolster its stock of cash, which should cover the company for another 24 months.
Brazilian President Michel Temer said his controversial pension reform plans are likely to pass despite a lack of support from large portions of his coalition. The Brazilian Socialist Party (PSB) has instructed lawmakers to vote against the law after the President said he would not make any more concessions or further water down the legislation.
Mexico's Pemex is mulling whether to repeat a hedging programme in future years in a bid to strengthen its balance sheet. The company is hedging oil output from May through December to protect against volatile oil prices in a deal that will cost the company up to US$135.5mn, according to Reuters.
Annual inflation in Mexico rose to 5.62% in mid-April, the highest level in almost 8 years according to the Central Bank. Banco de Mexico raised the country's benchmark interest rate to 6.5% last month, the highest since 2009, in a bid to further rein in inflation.
Peru's Orazul Energy Egenor priced a US$550mn bond in the international markets this week. The Peruvian energy firm launched the deal at 5.625%, at the tight end of guidance, and saw US$1.75bn in demand.
Guatemala's Energuate is wrapping up a roadshow this week as it looks to tap international investors for US$350mn. The energy distribution company could make its international capital markets debut as early as Friday.
Economic activity in Argentina fell 1.9% in February, the biggest monthly drop since December 2015 - when President Mauricio Macri took the helm, according to Reuters. Activity also fell 2.2% compared with the same period the year before. February's drop was driven by a 7.1% decline in manufacturing activity, a 6.7% drop in mining activity and a 4.9% decrease in wholesale and retail commerce.
The Central Bank of Argentina kept its benchmark interest rate unchanged at 26.25% this week. The Bank raised its benchmark interest rate earlier this month by 150bp in a bid to further rein in inflation.
Asia
Malaysia EXIM Bank issued a bond worth US$45mn maturing in 2022 with a 3% coupon. The notes were sold at a price of 100% with an initial yield of 3%. HSBC was the sole bookrunner for the deal.
Foreign holdings of rupee-denominated government and corporate bonds grew by INR360bn (approx. US$5.6bn) in the first quarter of this year, according to data from Bloomberg. Foreign holdings of rupee-denominated bonds issued inside India now stands at INR272.6bn, bolstered by higher relative economic growth and growing interest from large insitutional investors and asset managers.
IRB Infrastructure Developers Ltd., an Indian road operator, is to debut infrastructure investment trusts, an asset class that has been in the works for nearly ten year. The trusts function as a hybrid instrument with bond-like characteristics and are effectively a securitisation of road revenues; the trusts come with tax incentives that allow both large institutional investors and individual investors to benefit from high after-tax yields.
Sime Darby Bhd is being put on review for a downgrade due to continued uncertainties around debt allocation between the parent and a recently de-merged business unit, Moody's said this week. The company's Baa1 rating - and a similar rating on its senior unsecured debt - is being reviewed following the company's plans to split off its plantation and property businesses.
Yields on Chines 10-year government bonds climbed to their highest levels since August 2015 on the back of investor concerns around growing risks to the financial system. Chinese 10-year bond yields hit a high of 3.515% on Wednesday in early trading before settling back down to 3.495% after an editorial published in local state-run press and penned by the Central Bank warned of further buildup of bad debt and growign risks in the financial system.
Chinese Rongshi International Finance issued international notes worth US$500mn maturing in 2022 with a 2.875% coupon. The bonds were sold at a price of 99.516% with an initial yield of 2.98%. Agricultural Bank of China, Bank of China, CITIC Securities International, CCB International, Citigroup, DBS Bank, Deutsche Bank, Essence Securities, Goldman Sachs, HSBC, ICBC, and Standard Chartered Bank managed the deal.
Indonesia's Ministry of Finance said Wednesday it had re-appointed HSBC as a primary dealer of government bonds following the bank's move to be locally incorporated. Last week, HSBC's branch in Indonesia was integrated with a local entity previously known as PT Bank Ekonomi Raharja, in a move that the bank said will expand its offerings and network in the country. According to Reuters, the new entity still fulfils the condition of being a primary bond dealer after the integration.
Road construction manager Korea Expressway Corp. priced a SEK720mn (approx. US$82mn) 15-year bond this week. The notes maturing 2032 were priced at par to yield 2.31%. Nomura was sole bookrunner on the trade.
Russia, CIS and Europe
Russia is to begin selling OFZ bonds to households this week, with the Ministry of Finance targeting about RUB15bn (approx. US$268mn) for the inaugural sale. The 3-year notes pay a semi-annual coupon that rises by 50bp every 6 months, from 7.5% to 10.5% at maturity.
Rusal launched its US$500mn trade this week, pricing the benchmark-sized issuance at par to yield 5.3%. Citigroup, Credit Suisse, Gazprombank, JP Morgan, Renaissance Capital, Sberbank CIB, Sovcombank, and VTB Capital managed the sale.
Russia's Phosagro hit the international market this week with a US$500mn bond maturing 2021. The notes were priced at par to yield 3.95%. Bank of America Merrill Lynch, Citigroup, Sberbank CIB, Societe Generale, UBS, UniCredit, and VTB Capital managed the sale.
Russia's Koks, which is part of Industrial Metallurgical Holding, is on the road to promote a 5-year US dollar-denominated Eurobonds this week. The company has issued guidance of 7.75-8% on the notes. The sale is being led by Citi, Gazprombank, Renaissance Capital, Sberbank CIB, and VTB Capital.
Credit Bank of Moscow will look to offer fresh perpetual bonds Wednesday. The subordinated US dollar bonds carry a guidance of 9-9.25%, and feature a 5.5-year call option.SG CIB, Credit Suisse, HSBC, Citi, J.P. Morgan, Raiffeisen Bank and Brokerage Company Region are managing the sale.
