As the diplomatic spat between Qatar and Saudi Arabia, the UAE and Bahrain begins to have a material impact on transport, on freedom of speech and on trade in the GCC, the bond market is looking for clues as to how dealflow will be affected. On Tuesday, the central banks of Bahrain, the UAE and Saudi are understood to have asked banks for details of their exposure to the gas-rich state — a development which the buyside is taking as a very concerning signal.
Qatari sovereign bonds were 20bp-25bp wider on Tuesday morning from Friday, and over the same time period Qatari financial bonds were 40bp-50bp wider, and corporates were 20bp wider.
Recent new issues were the hardest hit. Ezdan’s bonds were 100.375bp, or a Z-spread of 302bp, on Friday but had sold off to 94.5, or 442bp, on Wednesday. Over the same time period, Qatar Reinsurance’s recent perpetual bond fell from 103.625, or 4.5%, to 99.375, or 5.1%.
At the time of writing, there had been limited impact on GCC spreads and the primary market in CEEMEA continues.
Turkey has not been to the euro market since 2014 and was on Wednesday offering a new eight year note at 295bp area over mid-swaps, which was around 20bp back of fair value. The deal offers a decent pick-up over the borrower’s dollar curve which should drive plenty of interest in this yield-starved environment.
Cote d’Ivoire is likely to garner the most attention this week, particularly after the strong performance of other sub-Saharan sovereign credit. The buyside expects Cote d’Ivoire’s amortising dollar note to land between 6.75% and 7%.
“I’m sure they would like to come flat to Senegal but I do not see them as good a credit as Senegal,” said an EM portfolio manager.
The euro portion will be closely watched as it is the first sub-Saharan African country, outside of South Africa, to issue in the currency.
“If you compare the euro issuance to the likes of Argentina in euros then this bond will be cheap (c50bp),” the portfolio manager added. “So any euro denominated investor who can hold Argentina will see this as a very attractive bond for similar credit risk.”
Chinese banks busy in EM loans
Over in EM loans, Chinese banks have been busy lending as well as borrowing. Afreximbank signed its largest ever syndicated loan at $1.2bn with 35 banks, five of which were Chinese. ICBC was one of the initial mandated lead arrangers and Bank of China, Export-Import Bank of China, Shanghai Commercial and Savings Bank and the Export-Import Bank of the Republic of China joined afterwards as mandated lead arrangers and bookrunners.
Meanwhile ICBC have taken out its own record facility at $1.25bn for its London branch and subsidiary ICBC London plc, with 16 banks on the deal. The two year bullet facility is split into a $500m tranche for the London subsidiary priced at 50bp over Libor and two tranches denominated in dollars and pounds, $325m priced at 50bp over Libor and £340m ($438.8) at 45bp over Libor, for the London branch.
Later this month, the bank is looking to close a $3.6bn deal, which it is co-leading with China Development Bank for Oman’s Ministry of Finance.
Virginia Furness +44 (0) 20 7779 8299
Bianca Boorer +44 (0) 20 7779 8423
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