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Emerging Market Credit Daily Roundup

Central Bank of Egypt surprises with rate hike – QIB prices RegS deal – Saudi Arabia to resume local debt sales – South African meets with rating agency – Ghana Central Bank continues record cuts – Province of BA cancels benchmark bond sale due to volatility – Temer refuses to step aside – Indonesia’s debt rallies on rating upgrade – Malaysia’s Matrix Concepts Holdings plans fresh issuance – Russia’s Tinkoff Bank to issue fresh Eurobonds

May 22, 2017 // 4:36PM


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Middle East & Turkey

The Central Bank of Egypt raised its key interest rates by 200bp on Sunday, citing stronger economic growth and falling unemployment, confounding the expectations of economists who estimated rates were unlikely to change. The bank’s Monetary Policy Committee hiked its overnight deposit rate to 16.7% from 14.75% and its overnight lending rate to 17.75% from 15.75%, it announced in a statement. This was the bank's first increase in rates since an aggressive hike of 300bp in November.  As a result, the yield on the five-year bond rose to 18.760% from 17.357% at the previous auction, while the yield on the 10-year bond increased to 18.652% from 17.244%

The Central Bank of Egypt (CBE) will issue short-term treasury bills totaling EGP12.2bn to help bridge deficit spending. The first would be at a value of EGP6.2bn, to mature in 91 days. The second will be worth EGP6bn, to mature in 266 days.

Qatar Islamic Bank (QIB) priced a US$750mn five-year RegS only Sukuk offering. The Sukuk was issued at par with an annual profit rate of 3.251%, representing a spread of 135bps over five-year mid-swaps. Citi, Emirates NBD Capital, HSBC, Noor Bank, QInvest and Standard Chartered Bank acted as bookrunners.

Central Bank of Bahrain (CBB) announced that the monthly issue of the Sukuk Al-Salam Islamic securities, has been oversubscribed by 205%. Subscriptions worth BHD88mn were received for the BHD43mn issue, which carries a maturity of 91 days and 2.20% coupon.

The Saudi government is expected to re-issue local debt this quarter or next, Finance Minister Mohammed al-Jadaan said on Saturday, quoted by Reuters. International debt, local debt and the government’s financial reserves are set to be the main funding sources for the state budget, with October’s suspension of monthly domestic bond issuances expected to be lifted shortly.

Saudi Arabia and the US have penned multibillion-dollar agreements on the back of Donald Trump’s maiden state visit to the Middle East. The Public Investment Fund, the kingdom’s sovereign wealth fund, agreed to commit US$20bn to an infrastructure investment fund with Blackstone Group LP, with the figure expected to eventually double in size with money raised “from other investors.” Saudi Aramco said it signed 16 accords with 11 companies valued at about US$50bn, while the US and Saudi Defence Ministries also negotiating a package of about US$110bn, according to a White House transcript on Friday.

Arab Petroleum Pipelines Co (SUMED) has reportedly inked a US$300mn loan agreement with National Bank of Kuwait's Egyptian subsidiary, according to a report from Reuters.

The Omani government will begin marketing a US$2bn Islamic bond in a bit to front-load the sovereign's financing requirements for the following fiscal year. The sovereign, which saw its credit rating cut to junk earlier this month, is said to be targeting a 7-year transaction, with analysts looking at pricing of between 4-4.5%.



The Lives and Livelihoods Fund and the Islamic Development Bank (IDB) have signed US$99mn financing agreement with the governments of three West African nations. The Sahel Sustainable Pastoralism Development Project, aims to support regional food security and improve the livelihoods of one million people in Burkina Faso, Mali and Senegal.

The World Bank, via the International Bank for Reconstruction and Development (IBRD), have pledged up to CAF60bn in concessional loans to Cameroon, with the proceeds used for road infrastructure development. According to the country's Department of Public Works, the funds will be used to upgrade and rehabilitate in the western and northwestern region of the country.

Ghana's Central Bank cut its Monetary Policy Rate (MPR) by another 100bp to 22.50% as inflation and inflation expectations are trending downwards, and said it would take "necessary policy action to move headline inflation towards the medium-term target." The Bank of Ghana (BOG) has now cut its rate by 300bp this year following a 200bp cut in March and by 350bp since November 2016, when it began an easing cycle.

South African ministers met with S&P Global Ratings after discussions with Moody’s Investors Service last week as the countries seeks to avoid another downgrade, Bloomberg reported.  The sovereign was reduced to junk by both S&P and Fitch Ratings last month due to concern political instability. S&P is due to make another ratings announcement on the nation on June 2, while Moody’s has placed the country under review for a downgrade. Both S&P and Fitch currently rate South Africa at BB+, while Africa’s most industrialized economy is two levels above junk at Moody’s.  Before the downgrade, the country had held investment-grade since 2000.



The province of Buenos Aires cancelled a US$500mn debt issuance after the new corruption scandal in Brazil hit the Argentinean markets. The bonds were due in 2022 and BBVA Frances, Banco Galicia, Santander Rio and HSBC were supposed to manage the deal. So far, the local authorities haven’t announced the new date of the issuance.

Brazilian President Michel Temer will not step down even if he is formally indicted by the Supreme Court, he said in an interview in the Folha de S. Paulo newspaper amid the latest corruption scandal – which implicated him directly. In the meantime, thousands have taken the streets in Brazil to demand the resignation of the president after the disclosure of a recording that appeared to show Temer condoning the payment of hush money to a jailed lawmaker. The court is expected to decide on Wednesday whether to suspend the investigation at Temer's request until it can be determined if the recording was manipulated to implicate him.

Brazilian toll road operator Rodovia das Cataratas S/A Ecocataratas issued BRL185mn in simple, non-convertible debentures due 2019 at the end of last week. Banco Bradesco managed the sale.

Brazilian wind farm operator Ventos De Sao Jorge Holding S.A. priced a BRL45mn debenture due 2028 at the end of last week. Banco Citibank led the sale.

Hundreds of thousands of Venezuelans took to the streets on Saturday to mark 50 days of protests against the unpopular government of President Nicolas Maduro, with unrest gaining momentum despite a rising death toll and chaotic scenes of looting. At least 46 people have been killed in the worst turmoil faced by Maduro since he won the presidency in 2013.

Chile’s ENAP, the national oil company, issued a US$250mn bond on the local market late last week. The deal was 2.5 times oversubscribed, according to local press reports.



Indonesia’s 10-year bond yields climbed as S&P Global Ratings’ upgraded its rating on the assumption that inflows of global funds will increase. The sovereign’s 10-year yield slid 6bp to 6.987%, the lowest close since Sept last year. Yields on 2-year securities, meanwhile, fell 4bp to 6.632%. With S&P’s upgrade to BBB- from BB+, Indonesia now has investment-grade ratings from all three major rating companies.

The Export-Import Bank of Korea issued international bonds for EUR750mn maturing in 2022 with a 0.5% coupon, and the notes were sold at a price of 99.40%. BNP Paribas, Goldman Sachs, HSBC, ING Wholesale Banking London and Societe Generale managed the deal.

Hong Seng, a real estate company based in Singapore, issued international bonds worth US$250mn maturing in 2020 with a 7.875% coupon. The notes were sold at a price of 99.021% to yield 8.25%. Bank of Communications and China International Capital Corporation (CICC) managed the deal.

Malaysian company, Matrix Concepts Holdings plans to raise up to RM250mn from issuance of Islamic commercial papers and medium term notes to finance future investments, working capital and capital expenditure. The sukuk will have a tenure of seven years and the first issuance under the programme will be made within sixty business days from the lodgement date. The Sukuk Wakalah Programme will be unrated and is structured based on the Shariah principle of Wakalah Bi Al-Istithmar. Maybank will be the sole bookrunner for the transaction.

MCC Group (China Metallurgical) issued international bonds worth US$500mn maturing in 2020 with a 2.95% coupon, and the notes were sold at a price of 99.815%. Bank of China, China Silk Road International Capital, DBS Bank, ICBC, Industrial Bank, ING Wholesale Banking London, Morgan Stanley and Standard Chartered Bank managed the deal.

Sri Lankan President Maithripala Sirisena announced a cabinet reshuffle which will see the foreign and finance ministers switch roles. Managala Samaraweera, who has been foreign minister since January 2015, was appointed as finance and media minister, swapping seats with Ravi Karunanayake, who takes over at external affairs, according to Reuters.


Russia, CIS & Europe

The International Finance Corporation (IFC) will invest US$153mn in subordinated green bonds issued by Poland's Bank Zachodni WBK to help it to finance climate-related projects. This is the first green bond issue by a commercial Polish bank, while the government issued green bonds for the first-time last year.

Russia's largest lender Sberbank has issued a five-year RUB110bn (US$1.9bn) loan to VimpelCom Holdings B.V., a subsidiary of Amsterdam-based mobile network operator Veon Ltd, they said on Monday. Veon, previously known as VimpelCom, said in a statement the loan would refinance the existing loans provided by Sberbank to its Russian business and would provide additional funds for general corporate purposes.

Russia’s Tinkoff Bank is looking to issue up to US$300mn in its debut perpetual subordinated Eurobonds, sources close to the bank told local TV channel RBC. The funds could go towards improving the bank’s capitalization amid tightening regulatory environment in retail lending.

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