Some of the world's major Central Banks - the US Federal Reserve, the Bank of England and the Bank of Japan - all meet this week. Many analysts expect the Fed to remain cautious, with Chairwoman Janet Yellen signalling earlier this month that the Bank needs to act gradually as it looks to lift rates this year. Although the Bank of England is expected to upgrade its growth forecast for the year, it isn't looking likely to raise rates later this week, with most analysts expecting the BoE to keep rates pegged at 0.25%. The Bank of Japan is to follow suit with a rates-hold hat trick, though analysts expect BoJ officials will focus largely on allaying fears of tapering its loose monetary policy.
MIDDLE EAST & TURKEY
Gulf International Bank (GIB) successfully placed a 5-year US$500mn sukuk at MS+170bp. The sukuk received orders of over US$1.2bn.
Egypt is considering issuing international bonds in currencies such as the Japanese Yen and the Chinese Yuan, the country's Finance Minister Amr El Garhy said this week. The announcement follows the sovereign's recent landmark US$4bn bond issuance.
Standard & Poor’s (S&P) has downgraded the credit rating for the Emirate of Sharjah to 'BBB+/A-2' from 'A/A-1', citing a significant increase in government debt. The agency expects Sharjah’s government deficit to average 3% between 2014 and 2017, compared with just 1% during the previous three-year period.
Lending conditions across the MENA are beginning to improve but still remain tight, according to data published by the International Institute of Finance (IIF). The IIF's credit activity index jumped to 44.2% in the Q4 2016, from 39.5% in Q3 - but still remains below the 50% threshold, indicating that a general tightening of the liquidity environment in the region remains.
Turkey reports December trade Tuesday, which is expected at -US$5.6bn. The country's Central Bank will also report inflation later this week, which is expected to increase by 0.1% to 8.6%.
In another blow to the country's' credit markets, Fitch Ratings downgraded Turkey's Long-Term Foreign Currency Issuer Default Rating (IDR) to 'BB+' from 'BBB-' last week. The issue ratings on Turkey's senior unsecured foreign currency bonds have also been downgraded to 'BB+' from 'BBB-'. S&P also reviewed the outlook on the country from 'stable' to 'negative'. The Turkish lira strengthened more than 1% Monday as investors shrugged off the ratings actions.
Banking sector profits in Turkey were better than expected, and rose to TRY37.53bn (approx. US$9.85bn) in 2016 from TRY26.05bn the previous year, according to the country's banking watchdog.
Turkish president Recep Tayip Erdoğan wrapped up a three-day tour of Southeast Africa this weekend, where he travelled with over 100 Turkish business owners, announcing that the country has signed six new agreement aimed at strengthening bilateral trade between Turkey and Mozambique, Madagascar and Zambia.
South African Finance Minister Pravin Gordhan accused several members of the Gupta family, among the country's most influential business leaders, of launching a protracted campaign against him and the Treasury, court documents reveal. Gordhan and the Guptas are currently involved in a court case linked to a series of influence-peddling allegations against the latter.
Nigeria's federal government, as well as the Kano state government are reportedly in talks with China's Exim Bank for two separate loans said to total upwards of US$1.2bn. The move comes as Nigeria steams ahead with plans to sell fresh bonds to international investors.
Kenya's Central Bank maintained its Central Bank Rate (CBR) at 10%, saying inflation was expected to remain within its target range in the short term, but there are "increased uncertainties with regard to the prevailing drought conditions and risks in the global markets. The Central Bank of Kenya (CBK), which cut its rate by 150bp in 2016, noted inflation eased to 6.4% in December from 6.7% in November.
The IMF has told Uganda that it needs to tap more of its domestic revenues to fund infrastructure development, because reliance on borrowed funds is "unworkable" and could lead to a spike in debt. The borrowing from China and other lenders like the African Development Bank raised questions among some opposition and government officials. Christine Lagarde, the head of the IMF, on a visit to Uganda told a business forum that infrastructure investment could help push Uganda's growth to above 5%, but the projects needed to be rigorously vetted and efficiently implemented, she said.
The recent decision by the US to remove the sanctions imposed on Sudan for the last two decades may unlock the potential for the government to tap its rich mineral and agriculture resources. Barack Obama’s executive order earlier this month lifted restrictions on petroleum and petrochemical industries, including oilfield services and oil- and gas-pipeline transactions by Americans, and also allowed U.S. citizens to process deals involving people in Sudan, and import and export goods. However, the African country’s reintegration into the global economy may be stifled by the new US president Donald Trump, who this week added Sudan to the list of countries who’s citizens are banned from travelling to the US.
Brazil is to report December central government budget data Monday, with a deficit of BRL64.5bn expected. While that seems high, the figure would suggest the second consecutive monthly rise, according to analysts at BBH. At the same time, the government of Brazil said the economy could expand as much as 0.5% in the first quarter of 2017, ending years of contraction, and is set to unveil a raft of new measures aimed at increasing access to credit.
The restructuring of Brazilian telecoms operator Oi SA continues apace. Elliot Management, a hedge fund, has proposed injecting as much as BRL9bn (approx. US$2.9bn) in capital investments, including BRL4bn in the form of a straight injection and BRL5bn that would go towards buying back the company's existing bonds. As part of the proposed deal, bondholders would also have the option of converting their debt into equity.
Argentine private bank Banco Supervielle has mandated Credit Suisse and Santander to organise a roadshow with global fixed income investors in advance of a ARS-denominated 3.25-year bond issuance.
Compania Latinoamericana de Infraestructura y Servicios (CLISA), an Argentine infrastructure developer, is planning to arrange investor meetings ahead of a retap of its 9.5% 2023s, which the company originally sold in July last year. The company has mandated BCP Securities and Santander to manage the trade.
Central American Bank for Economic Integration (CABEI) has issued a HKD400mn (approx US$51mn) 7-year bond paying a coupon of 3.27%, the first time the issuer tapped the Hong Kong market in over ten years.
Chilean water utility Essbio S.A placed a UF500mn in 25 year notes at 80bp over the reference rate.
Colombia's Central Bank kept interest rates steady at 7.5% at the end of last week after a better than expected inflation and growth report, despite the fact markets were looking for a 25bp cut. Inflation expectations for the end of 2017 rose to 4.46%, up from 4.19% forecast last month, and the bank is expected to release its quarterly inflation report on Friday.
Chile reports December manufacturing production and retail sales Monday, with the former expected at -1.3% year on year and the latter expected at +4.9% year on year.
Peru has settled penalties with the Odebrecht-led Gasoducto Sur Peruano (GSP), a half-built natural gas pipeline, related to public guarantees of US$262.5mn for the project after it was terminated late last week. The government will have to re-tender the contract to complete construction of the southern pipeline after the existing concessionaires failed to attract the requisite funds, and because Odebrecht – rocked by a series of scandals – is being pressured to divest its share of the project.
The Bangladesh Central Bank maintained its two key policy rates to support growth and mitigate inflation risks, and forecast that economic growth in the current 2017 fiscal year would exceed 7% while inflation would be within a range of 5.3-5.6%in June 2017. The Central Bank of Bangladesh cut its two policy rates, the repo and reverse repo, to their current levels of 4.75% and 6.75% in January 2016.
Pakistan's Central Bank maintained its policy rate at 5.75%, as expected, citing a healthy expansion of credit, upbeat sentiment among businesses, a stable exchange rate and lower-than-expected inflation. The State Bank of Pakistan (SBP), which cut its rate by 25bp last year but left the rate steady at its last policy decision in November, said current trends point to inflation in the current fiscal year remaining below the target of 6%.