In his customary showbiz style, US president Donald Trump has been teasing over the last few weeks the identity of the next Fed chair, who will take over from Yellen in February.
Fed governor Jerome Powell and economist John Taylor are frontrunners, according to media reports. Yellen also threw her hat back into the ring for a second term.
“It’s definitely the biggest thing in front of the market this week,” said one emerging markets asset manager. “It’s more about getting some stability and certainty at this stage and I’m sure there will be a lot of pouring over past views of whoever has been picked to try and get an idea of where they might head.”
Despite the distractions, trades are still underway, with the Middle East a hotspot.
Emirates NBD announced a five year dollar roadshow on Monday, while Omani electricity supply company Mazoon opened books on a 10 year dollar sukuk Wednesday morning at mid-to high 5%.
“There’s been a lot from the Middle East recently,” said another investor whose fund is looking at Mazoon. “Generally, the market has been in good shape this week after emerging markets had a bit of a wobble on the FX side over the last few weeks.”
The investor added: “If issuers are willing to add a decent premium, there should be no problem in them getting done.”
LatAm limits
Meanwhile, no matter how hot the LatAm bond market may be, investors still have their limits. For many, local currency — specifically global local deals from non-sovereign issuers — is still not the screaming buy some suggest it should be.
Banco Nacional de Costa Rica refrained from selling what would have been the first ever global local colón deal this week, surprising few in the market. Popular Colombian names EPM and Davivienda have managed to sell larger peso deals than they could in the domestic market, but given apparently attractive pricing a large number of buyers were not keen — be it for FX fears, liquidity worries, or simply a lack of time to carry the extra analysis that a local currency deal demands
Ironically, given it remains a single-B jurisdiction despite yet another upgrade from Standard & Poor’s this week, Argentina is the one frequent source of local currency deals. Banco Hipotecario is due any day now with a floating rate peso-linker; the 17% coupon floor will surely help ease concerns for many buyers.
More important for the Argentine government this week will be the reception it receives in euros. LatAm issuers have in recent years tended to offer hefty premia to their dollar curve when heading across the Atlantic, so investors will be keeping an eye on whether there could be some attractive arbitrage on offer when the sovereign is due back in the single currency on Thursday.
FirstRand turns to Asia
Over in the emerging markets syndicated loan market, FirstRand Bank Ltd has tapped Asia for funds, raising more than double its launch amount of $250m. The bank increased the deal to $540m following strong demand from Chinese and Taiwanese banks. Standard Chartered was sole co-ordinator on the facility which has tenors of two and three years.
In the Middle East, Dubai Aerospace Enterprise (DAE) Capital has financed an Airbus A320-200 aircraft for Saudi Arabian Airlines' low-cost carrier flyadeal with a bilateral loan from Bank ABC. Bank ABC is leading three other deals in the market for Gulf Petrochem, Warba Bank and Albaraka Turk, which are expected to be signed in the coming weeks.
In Russia, two more deals have entered the market. Siberian Anthracite has launched a $700m PXF with a tenor of four or five years, with ING as sole lead. And Chelpipe is looking to raise up to $150m equivalent, denominated in euros and dollars, with RBI leading the facility. Both are being treated as club deals.
Francesca Young, emerging markets editor, +44 (0)20 7779 7317
Virginia Furness, emerging markets deputy editor, +44 (0)20 7779 8299
Olly West, Latin America reporter, oliver.west@globalcapital.com
Bianca Boorer, emerging markets loans reporter, +44 (0)20 7779 8423
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