Friday saw US non-farm payrolls disappoint, at 138k in May, below expectations of 182k, and down from a revised 174k in April. The slope of the US yield curve is flatter as the market continues to expect a Fed hike on 14 June, but longer-dated bond yields are declining as the inflation outlook eases in the US.
Middle East & Turkey
Saudi Arabia, Egypt, the United Arab Emirates and Bahrain have all severed ties with Qatar in a coordinated move, claiming the gulf state supports extremism and is destabilising the region. Critics suggest the move was in part due to Qatar's relative openness to developing closer ties with Iran, Saudi Arabia's principal regional rival. Oil prices lifted on the back of the decision, with oil futures rising 1.6% in early morning trading Monday, which Qatar's main stock index dropped 5.5%.
UAE gas producer Dana Gas has appointed financial and restructuring advisers to help the company restructure its US$700mn sukuk maturing October 2017. Creditors have hired Moelis and Weil, Gotshal & Mangers as financial and legal advisers to negotiate the restructuring of the Islamic bonds, according to Reuters. The company has struggled in recent years and has come under strain after a number of its investments in Egypt performed below expectations. A deal with lenders aimed at securing a bridge loan to help take out the sukuk and defer repayment fell through earlier this year.
Business conditions in Egypt’s non-oil private sector deteriorated in May, as has been the case throughout the past 20 months, according to the latest Emirates NBD Egypt PMI. The latest downturn was marked by drops in output and new orders, though the respective rates of contraction eased. Moreover, non-oil Egyptian firms registered a rise in new export orders, as international demand strengthened.
The International Finance Corporation (IFC) announced that it would invest US$150mn in covered bonds issued by Turkey’s Garanti Bank to support the development of green buildings in the country's housing sector. The bonds will carry a 5-year maturity and will be backed by a portfolio of residential mortgages.
Afreximbank has closed a US$1.2bn dual-currency, dual-tranche syndicated loan earlier this month, the bank said in a statement this week. The funding package consists of a US$632.9mn 2-year facility and a €499.6mn 3-year facility. The facility received US$1.36 in commitments during the general syndication stage, which was led by Standard Chartered Bank. About 13 regional and international lenders participated with the transaction.
Financing for the standard gauge railway linking East Africa's largest economies could be in jeopardy if the three countries can't agree on a joint approach to the project, according to local press reports. China, the leading backer of the project, has signalled that a coordinated approach would be critical to minimising political risk associated with the project.
South Sudan reported that it is producing around 130,000 barrels of oil a day and has ambitions to increase its refinery capacity to supply fuel to neighbouring countries, the petroleum minister said on Monday, according to Reuters. One of East Africa's major oil producers, South Sudan is aiming to double oil output to 290,000 bpd in 2017/18, the finance minister said in January.
An early count from the State of Mexico's electoral institute projected the candidate from President Enrique Pena Nieto's ruling PRI party, Alfredo del Mazo, as winning between 32.75% and 33.59% of the vote, narrowly beating out the candidate of Andres Manuel Lopez Obrador's National Regeneration Movement (MORENA) party, Delfina Gomez. The result is likely to help boost PRI's 2018 election prospects despite a broad decline in the party's - and the President's - approval ratings. As a result, Mexico’s peso was the biggest mover among international currencies, dipping 0.5% to 18.7777 per dollar on the news.
Exitus Capital, a Mexican Financial institution, is set to issue a MXN300mn 5-year trust bond in the local markets. Banco Invex acted as the trustee and Actinver managed the deal.
The White House is reportedly considering sanctions against Venezuelan energy companies including PDVSA, the state-run oil giant, according to a report in Reuters. According to the news agency, the US could impose sanctions on PDVSA as part of a sectoral package of restrictions aimed at its energy industry. The move could deal the economy a final blow, with oil accounting for about 95% of the country's export revenues. Meanwhile, the ailing Latin American economy's opposition parties have put more pressure on Wall Street banks by alleging that some of the proceeds from a recent bond sale will be used to purchase weapons from Russia and help prop up Maduro's regime.
Argentina's Province of Mendoza placed ARS5.2bn bond in the local capital markets late last week. The notes due 2021 will help the provincial government refinance up to ARS3.8bn in existing liabilities. The sale generated over ARS7bn in orders, according to the province's Finance Minister.
Brazil's state-run oil giant Petrobras prepaid BRL1bn (US$308mn) in export notes issued by Itaú Unibanco Holding SA on Friday. In a securities filing, Petrobras said the notes were due in 2020, and that the company will continue to deleverage in 2017.
Far East Horizon ltd, a financial services organisation, is looking to list its US$4bn medium term note programme on the Hong Kong Stock Exchange, according to a regulatory filing. The programme, which launched this year, is being arranged by HSBC and Standard Chartered Bank.
Foreign investors raised their holdings of Chinese treasury bonds by CNY5.06bn (approx. US$743.9mn) in May, according to official statistics. Foreign portfolio investors also increased their broad holdings of Chinese debt by CNY2.3bn, bringing the total held by these investors to CNY774.6bn. China's bond market is worth about CNY66.9tn, according to figures from Reuters, People's Bank of China (PBOC), and the China Central Depository and Clearing Co (CCDC).
India's Capital First plans to sell up to INR250mn in non-convertible debentures through a private placement, according to a filing with the National Stock Exchange of India. The debentures due 2020 will also come with a INR250mn green shoe option.
A build-up of bad loans in India's banking sector is expected to continue rising until at least 2019, according to figures published by CLISA. The volume of dodgy loans is forecast to rise from INR4tn in 2017 to INR4.3tn in 2019, with the bulk of that coming from state-run banks.
The State Bank of India, the country’s largest lender, is said to be opening its books to qualified investors this week as it looks to sell up to US$1.5bn in fresh debt overseas. Earlier this year the bank said it would look to sell up to US$1.5bn in bonds early in the 2018 financial year.
City Bank, one of Bangladesh's largest lenders, has received the thumbs up from the Bangladesh Securities and Exchange Commission (BSEC) to raise up to BDT5bn (approx. US$62mn) in Tier 1 capital. The bonds will be issued to help the bank meet its capital requirements under Basel III and strengthen its regulatory capital base, according to a statement released at the weekend.
South Korea's new government announced a KRW11.2tn (US$10bn) fiscal stimulus package on Monday, increasing social welfare subsidies and taking steps to deliver on the new President Moon Jae-in's election promise to create 810,000 public sector jobs.
Russia, CIS and Europe
The takeover of Kazakhstan's Kazkommertsbank by rival Halyk Bank edged closer last week as the two lenders agreed that Halyk could buy the stakes of Kazkommertsbank's two biggest shareholders for a symbolic amount of 1 tenge (US$0.0032) each, according to a statement from the Central Bank. As part of the agreement, Halyk is due to inject capital into Kazkommertsbank after is sells about US$7.5bn in dodgy loans. The merger between the two large lenders, which was agreed in March, is being supported by the government and the Central Bank.
Russia's Finance Ministry said it would increase its purchases of foreign currency on the domestic market more than fivefold in June, to RUB45.1bn (approx. US$797.4mn), according to Reuters. Daily purchases will amount to around RUB2.1bn between June 7 and July 6, up from RUB0.4bn between May 10 and June 6.
Russia's Polymetal inked an agreement with Sberbank that will see it extend an existing US$400mn bond for 7 years. "We are significantly extending the maturity profile of our debt portfolio while maintaining low interest costs. This is an important milestone in strengthening and developing our relationship with Sberbank," said Vitaly Nesis, Group CEO of Polymetal in a statement.
Russia’s Gazprombank plans to launch a new RUB10bn 3-year exchange bond, after releasing the first coupon rate guidance at 8.7–8.9% on Thursday. The technical placement of the bonds is preliminarily scheduled for June 14, with the bank itself acting as organizer.
Polyus PJSC is selling at least US$700mn of new and existing shares, in bid to meet Moscow’s stock-listing rules and raise cash. The company is offering at least 7% of its capital in a combination of new and existing shares owned by billionaire Suleiman Kerimov’s family, it said in a statement on Monday. Some of the shares will be traded as global depository receipts on the London Stock Exchange, marking Russia’s largest gold producer’s return to Britain.
Creditors of Russia’s ailing Orthodox Church Bank Peresvet, who voted against the bail-in mechanism, will be fully compensated for their investments, according to Deputy Chairman of Russia’s Central Bank, Sergey Shvetsov. The decision will cause some concerns for minority bond-holders, who will have to participate in the bail-in even if they had voted against it, as well as other creditors who approved the bail-in.
Russia’s financing plan for projects in Tambey group of gas fields in the Yamal region will exclude some of the Chinese investors that were mentioned earlier in favour of European banks. According to Leonid Mikhelson, CEO of Novatek, the gas company running the project, the plan is to attract up to US$19bn worth of financing, with Italy’s Intesa and SACE, France’s Coface, German Hermes and a host of other European banks queuing up to take part in the deal.
Russian power grid company Rosseti plans to place a RUB10–15bn local bond this summer, with proceeds expected to support its affiliates and daughter firms, Deputy CEO Yegor Prokhorov said on Friday. According to Bloomberg, Rosseti plans to refinance up to RUB40bn worth debt until the year’s end, but that figure can rise if interest rates ease further.