CEE Bonds
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New Zealand lender Kiwibank sold its first senior unsecured Swiss franc bond on Thursday. The issuer's solid credit rating and lack of outstanding debt allowed a solid success in spite of volatility earlier in the week. -
US financial sanctions on Russia may be a remote possibility, according to emerging markets analysts, but if measures were imposed, the country's bond issuers' would find it very hard to fund internationally. Russian bank plans to expand abroad would also be derailed, and US banks with large exposures to the country could also be hit.
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Syndicate bankers are primed for a busy period in dollars next week following the smooth execution of four benchmarks in the currency this week despite uncertainty and volatility caused by the situation in Ukraine.
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Investors have been wringing their hands about secondary trading of EM bonds recently. Violent price action fosters illiquidity and makes new issues tough to execute. Russia’s altercation with Ukraine is just the latest driver of that. But the real problem that EM desks are going to face is not disruption, but the potential lack of bond and loan business as growth slows.
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Undaunted by Turkey’s domestic economic and political uncertainty, the country’s participation banks are lining up to to hit the international market with deals, say bankers. Turkiye Finans looks likely to lead the pack and could bring both a dollar sukuk and murabaha financing.
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A European Union support package for Ukraine could add an extra €1.6bn to the issuer’s funding programme this year — but the form of the extra fund raising will be dependent on the pace at which Ukraine receives the funds. A benchmark deal, taps of existing trades or private placements could all form part of the issuer’s new plans.
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The focus on Ukraine has moved from the macroeconomic to military sphere. But it is worth remembering that even if full scale conflict with Russia is averted, Ukraine’s economy is in an appalling state, and the bond market helped it end up there.
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Promsyvazbank (PSB) postponed its tier two dollar bond on Monday because of growing tension between Russian and Ukraine, but the borrower has every intention of returning to market once conditions improve. The Republic of Azerbaijan, meanwhile, has pushed on with investor meetings although it will likely face higher spreads for its inaugural dollar sale unless the situation is resolved soon.
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The appeal of long-dated debt is on the rise in Swiss francs, with a return to the market from New Zealand's Auckland Council this week drawing strong demand as a result of its 12 year maturity. The issuer was able to easily reach its size cap at a tightened price.
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Russian international bond volumes printed this year are at $4.5bn, not even a third of the $13.6bn printed by this time last year. After Promsvyazbank postponed its roadshow earlier this week, bankers said that they expect another quiet few weeks from the country as credit spreads stabilise after having been punched higher by the country’s involvement in the Ukraine crisis.
