GLOBAL
The WTO’s Trade Facilitation Agreement (TFA) has entered into force, with supporters hailing it as the greatest single achievement in the organisation’s history. The ratification is a timely boost for free trade advocates, at a time when the populist protectionist rhetoric of US President Donald Trump has been dominating the debate. The TFA has been under discussion since 1996 and has been awaiting ratification since 2013. The process was slow, but at last, the WTO has a ratified agreement. The TFA standardises customs procedures among WTO member states, cutting costs and reducing the time it takes to export and import goods. The WTO forecasts that it will slash trade costs for members by 14.3% on average, boosting global trade by up to US$1tn per year.
Middle East & Turkey
Qatar National Bank (QNB) priced a US$200mn bond due 2018 at par this week. The notes pay a coupon of 3MLIBOR +0.37%. The sale was arranged by HSBC.
In a regulatory filing, Qatar Islamic Bank said it has secured board approval to increase its Tier 1 sukuk issuance from QAR5bn to QAR7.5bn. The company will need to secure approval from the country's Central Bank.
Banks rejected a Saudi Telecom plan to bail out its Turkish unit, Otas, over a missed payment on a US$4.75bn loan, which could see the impasse extended for months, according to a report from Bloomberg. The deal reportedly involved Saudi Telecom paying Otas US$160mn, equivalent to the missed payment, and buying a direct stake in the Turkish telco.
The Government of the Sultanate of Oman has hired Bank Muscat, Citigroup, Deutsche Bank, HSBC, ICBC Standard Bank, JP Morgan, Societe Generale and Standard Chartered for an upcoming US dollar bond. The bond, which is said to range between US$1-1.5bn, is likely be sold before the end of Q1 this year.
Africa
Nigeria's acting president Yemi Osinbajo has already petitioned Parliament to approve a US$500mn Eurobond transaction following its US$1bn issuance early this month. "Following the high over subscription of the recent $1 billion Eurobond issuance, we wish to take advantage of favourable market conditions to issue a Eurobond Debt Instrument of $500 million to fund the implementation of the 2016 budget," he wrote in a letter to lawmakers this week. Nigeria's 15-year US$1bn Eurobond priced tighter than most analysts expected, and were oversubscribed eight times over.
Barclays Africa Group Ltd. apologised for its role in a rand-fixing affair involving more than a dozen banks, saying that it tipped off regulators about the practice after suspending two of its own traders. South Africa’s antitrust investigators listed more than a dozen banks, including Barclays Africa, in its probe earlier this month and named more than 30 traders for price fixing and market allocation in the trading of foreign-currency pairs involving the rand.
Zambia's Central Bank cut its policy rate by 150bp, the reserve ratio by 250bp and the overnight lending facility rate by 400bp citing a sharp fall in inflation, continued appreciation of the kwacha's exchange rate and improving economic prospects. It is the first cut in rates by the Bank of Zambia since the current policy rate was introduced in March 2012 when the bank moved away from targeting money supply.
South Africa's National Treasury revealed it will need to borrow more for 2017 than originally anticipated last year, with capital shortfalls largely driven by Transnet and Eskom, two large state-owned companies, the country's Finance Minister revealed this week. For 2016/17 South Africa will need to borrow an extra ZAR32.8bn (approx. US$2.5bn). Of the 2015/16 total borrowing from the country's six state-owned companies, Eskom and Transnet accounted for up to 75%. This year, all six state-owned companies will look to borrow a total of ZAR102bn from a range of sources including the capital markets, multilaterals and banks. The figures were revealed in the country's recently tabled budget, which will also see new taxes introduced on the wealthy.
Latin America
Brazil's Central Bank maintained its pace of interest rate cuts as expected on Wednesday, but signalled policymakers could step up monetary easing in an attempt to pull the economy out of its worst recession ever. In a unanimous vote, the bank's 9-member monetary policy committee cut its benchmark Selic rate by 75bp for the second straight time to 12.25% - its lowest since March of 2015.
Brazil’s President Michel Temer has suspended a measure that would have opened the door for the country to import large amounts of coffee for the first time. The president asked the ministries of agriculture and industry and commerce to study in greater depth whether it was necessary to incentivise imports of green robusta beans by cutting import taxes, writes Joe Leahy in Rio de Janeiro.
Brazil's Vale SA, the world's largest iron ore producer, will next month redeem €750mn (US$792mn) of bonds maturing in 2018, the company said in a securities filing Wednesday. The company did not highlight any reasons for the early redemption.
Pernambuco Thermoelectric Plant, a Brazilian electricity producer, has suspended the sale of fresh debentures to March.
Brazilian pulp and paper producer Klabin is looking to sell up to BRL700mn (US$228mn) in agriculture debentures (CRAs) in two maturities.
Paraguay's Supreme Court ruled in favour of the Treasury Ministry on Wednesday in a dispute over the constitutionality of a proposed bond sale, allowing it to issue US$550mn in debt next month. President Horacio Cartes' government plans to use the sale to pay off existing debt and finance infrastructure projects in the landlocked South American country.
Panama's cabinet has approved a US$150mn loan from the Inter-American Development Bank (IDB), which will be put towards water sanitation and sewage projects, including water processing plants in Arraijan and La Chorrera districts, which are located in the Oeste province.
Peru's Economy and Finance Ministry has successfully amended the country's securities regulations in order to allow the settlement of all sol-denominated sovereign bonds in International Central Securities Depositories. The government said the move will enable it to attract a greater number of international investors to participate in the local currency fixed income market in Peru. The move comes one day ahead of a scheduled PEN350mn sovereign bond auction - split between tranches maturing in 2023 and 2037.
Argentina's Province of Cordoba US$510mn in bonds maturing 2024. The notes were sold at par to yield 7.45%. JP Morgan and Morgan Stanley were sole bookrunners on the trade. Proceeds will mostly go towards refinancing its US$396mn bond due in August, with the remainder allocated to infrastructure projects.
Argentina's provinces risk overleveraging in US dollars, according to Fitch. About 80% of the debt owed by the 11 Argentinian local and state governments will be denominated in US dollars, up from just 55.9% of the debt load in 2015, despite the fact that the vast majority of their revenues are denominated in pesos. Over the past year Argentine provinces issued US$7.4bn in dollar denominated debt.
Mexico's Economy Minister Ildefonso Guajardo said applying tariffs on US goods is "plan B" for Mexico in trade talks with the United States, if negotiations aimed at achieving a new mutually beneficial agreement fail. Guajardo told the local media he expects the North American Free Trade Agreement (NAFTA) negotiations with both the United States and Canada to begin this summer and conclude by the end of this year.
Asia
China's United Overseas Bank priced two fresh bonds this week: €500mn due 2022 priced at 99.498% to yield 0.227%; and US$500mn notes due 2020 priced at 99.734% to yield 2.219%. The sales were arranged by BNP Paribas, Deutsche Bank, DZ BANK, HSBC, UBS, and United Overseas Bank.
Hong Kong Xinhu Investment Co. issued US$700mn in fresh bonds maturing in 2020. The bonds, which carry a 6% coupon, were priced at 99.595% to yield 6.1599%. Bookrunners on the deal were AMTD Asset Management Limited, Bank of China, CITIC Securities International, Everbright Securities, CLSA, Haitong International securities, Shenwan Hongyuan Group, UBS, and Zhongtai International Securities.
China Orient Asset Management, one of China's largest state-owned financial institution, this week issued an upsized CNY850mn bond maturing in 2020. The bonds were sold at part ot yield 6.5%. JP Morgan was the sole bookrunner on the trade.
India's Tata Communications landed a US$250mn loan from Export Development Canada to help finance the rollout of new telecoms infrastructure in the south of the country.
Standard Chartered has arranged a financing package of US$197mn for a power plant in Bangladesh. Siemens Bank will co-finance the total, which will account for 80% of the required capital for North-West Power Generation Company’s (NWPGCL) combined-cycle dual fuel power plant near Sirajganj. The remaining 20% will come in the form of equity from NWPGCL.
The Bank of Korea held interest rates in February as expected. South Korea’s Central Bank held rates steady at 1.25% in line with a median of economists’ estimates compiled by Bloomberg. The decision keeps rates at the level they were cut to in June, the only adjustment made in 2016.
Russia, CIS and Europe
Russia is adopting a more targeted approach when it comes to the banks it selects to participate in its next Eurobond sale in a bid to avoid a public snub, said Konstantin Vyshkovsky, head of the state debt department at the Russian Ministry of Finance, in an interview with Bloomberg this week. He said he wanted to avoid a similar situation encountered on its previous Eurobond sale last year, when some large global institutions somewhat publicly avoided the transaction in a bid to ensure they don't violate any sanctions currently imposed on the country.
The Czech Finance Ministry attracted zero bids for a new 0% coupon bond due in 2022 at an auction this week, a further sign investors are looking for greater returns on the country's risk. The Ministry offered CZK1bn (US$38.93mn) of new paper maturing 2022 alongside a shorter-dated zero coupon bond due in 2019, which garnered demand of CZK10.2bn. It sold CZK8.1bn at an average yield of -0.283%. For the past few years, the sovereign's bonds trading with tenors as long as 6-years have traded with negative yields in the secondaries, but some bonds with tenors as low as 2-years are now trading with positive tenors.
