Middle East & Turkey
Saudi Arabia's Bank Aljazira has set up a special purpose vehicle for the back to office financial derivatives. The SPV was set up to execute financial derivative transactions and repurchase agreements with international banks.
Saudi Arabia has restored a raft of allowances for government employees after the government overshot its savings targets. In an interview with Bloomberg, Mazen Al-Sudairi, head of research at Al Rajhi Capital said that the government revenues have been "better than expected" and that the government has managed to trim its deficit by about 50% in Q1 2017.
HSBC has won a highly-prized mandate to work on Saudi Aramco's impending IPO, the bank's chief executive said this week. JP Morgan and Morgan Stanley are also working with the state-owned oil company on the transaction which is expected to net upto US$100bn.
Turkey's Capital Markets Board announced a range of modifications regarding debt instruments. Among other changes, an entity's board of directors can make decisions about issuing debt instruments. It also removed the requirement to ratify issuing documents for foreign debt instruments.
Libya's Central Bank said this weekend it would intervene to defend the country's currency, which has been hit with severe volatility and a widening gap between official and black market rates. The dinar officially trades at LYD1.4 per US dollar, but is going for between LYD9-10 on the black market.
Ghana's Central Bank has confirmed that it will not be financing the country's budget deficit as the government looks to keep its fiscal consolidation commitments intact. Last year the government passed a law that would all the Central Bank to fund up to 5% of the previous financial year's budget, which would breach the terms of a crucial IMF funding programme secured in 2014.
Fitch Ratings upgraded Namibia's rating on the South African scale to 'AAA (zaf)' from 'AA+(zaf)'. The outlook is negative. Fitch also upgraded Namibia's senior unsecured bonds rated on the national scale to 'AAA (zaf)' from 'AA+(zaf)'. “The upgrade distinguishes Namibia from South Africa, and it shields Namibia from collateral damage as a result of the South African downgrade.” Said the Finance Minister, Calle Schlettwein to the local press.
Zambia’s main opposition party dismissed accusations that its activists set buildings ablaze last week, as President Edgar Lungu considers imposing a state of emergency to quell unrest in the African country. “We are not responsible for the fires,” United Party for National Development Chairwoman Mutale Nalumango told reporters Sunday in the capital, Lusaka. Earlier this month UPND leader Hakainde Hichilema was arrested and charged with treason after a convoy he was traveling in failed to pull off the road for Lungu’s motorcade.
Zimbabwe's Central Bank Governor John Mangudya told press at the weekend that the Central Bank won't issue any new bond notes, an alternative currency aimed at stemming runaway inflation, reversing course on the controversial move. The government initially said it would pump up to US$200mn worth of bond notes into the system, but only some US$120mn has been put into circulation.
Brazil-based pharma company Raia Drogasil SA sold BRL300mn (approx. US$96mn) in local debt this week. Sale of the 5-year notes was led by Banco Itau.
Brazilian commodity-focused holding company Companhia Melhoramentos Norte do Paraná issued a BRL190mn debenture in the local markets at the end of last week, regulatory filings show. The notes maturing 2022 were priced at par and yield 3.900% over the DI. Banco Itau coordinated the sale.
S&P Global Ratings downgraded from "A-" to "BBB+" both the Foreign and Local Currency LT credit ratings of Trinidad and Tobago. The outlook is stable.
The Argentinean province of Santa Cruz might need to tap the international markets for US$350mn just to pay the salaries of the provincial government employees, which represent 40% of the active population in that state. According to local media, the government of Alicia Kirchner is also looking to secure a credit line of around ARS900mn with the state-owned Banco Nacion, to cover everyday expenses. The southern province, one of the smallest in the country, has had problems meeting payroll payments since December last year.
Chilean bank Itau Corpbanca is set to receive a syndicated US$465mn loan from 13 banks to refinance existing maturities, according to local press reports.
Yields on Indian state development loans (SDL) have more than doubled in the last two years, according to fresh data from CCIL and Bloomberg. Average spreads over government securities for SDLs, which are issued as bonds by state governments, grew from 44.87bp over G-Secs in September 2015 to 95.42bp over G-Secs.
Russia, CIS and Europe
Volatility subsided in the Central and Eastern European capital markets upon the news from France, where centrist pro-European candidate Emmanuel Macron leads far-right candidate Marine Le Pen, going into the second round of the election. One-month options for the Polish zloty versus the dollar dropped to 9.15% from a Friday close of 12.92% - the largest one day fall since March 2009. Similar measure for the Czech crown and Hungarian forint both fell by more than 3pp.
Ukraine might place a new round of Eurobonds in September-October and the sum of the issue will be around US$ 1bn, the Finance Minister, Oleksandr Danylyuk told the Wall Street Journal. Danylyuk said he also expects the next IMF loan tranche - estimated at US$ 2 bn - already in June-July, following parliamentary approval of pension reform and the launch of a farmland market.
The Russian Central Bank’s decision to activate the bail-in clause to provide relief for the country’s ailing Peresvet bank could send out a worrying signal to senior creditors of the country’s other banks, Moody’s warned on Monday. The RCB last week announced it will lend RUB66.7bn roubles (US$1.19bn) to help keep the troubled Russian Orthodox Church lender afloat. An additional RUB69.7bn required to cover the RUB103.6bn budget deficit will be sourced from the bank’s 70-odd lenders, who agreed to convert their loans into 15-year subordinated bonds, which rank after other debts if the bank faces bankruptcy. “The transition from a bail-out mechanism to a bail-in mechanism is raising the risk of losses for creditors and bond-holders in future cases,” said Moody’s junior vice-president Svetlana Pavlova, quoted by Vedomosti newspaper.
Russia’s Rosneft plans to return to the debt markets with a RUB30bn 10-year exchange bond on Wednesday, according to a report by Vedomosti. The newspaper claims the first coupon guidance will amount to 8.65–8.80%, corresponding to a 8.84–8.99% annual yield to a 6-year offer. Gazprombank will act as the organizers of the placement, while VTB Capital, brokerage company Region, Promsvyazbank, and Sberbank CIB will act as co-organizers.
Russian gas giant Gazprom and its Western counterparts agreed on Monday on the financing of the EUR9.5bn (US$10.32bn) Nord Stream 2 pipeline, removing a big obstacle for a Russian plan to deliver more gas into Europe. At a signing ceremony in Paris, Uniper, Wintershall, Shell, OMV and Engie agreed to each loan 10% of the cost of the venture, or up to EUR950mn each, while Gazprom will take on 50% of the cost for the pipeline, which is due to launch in 2019. The deal is subject to approval of the European Commission, which has shared some of the concerns of Baltic states about the pipeline, which would further increase Europe’s dependence on Russian gas.