up cash reserves. That has left those who
were long heading into the recent volatility
lNDINGûTHEMSELVESûWITHûNOWHEREûTOûGOûASû
they absorb losses.
“You had to have the right position on as
you can’t trade out of things at the
moment,” he said.
The third trader thought it was hard to
say whether banks would give their EM
CREDITûTRADINGûDESKSûLEEWAYûORûIFûAûSPECIlCû
point would be hit where they would cut the
desk free. Ultimately, he said it would be a
question of losses.
!LTHOUGHûTHEûPRICESûONûSCREENSûREmECTû
ASSETSûBLEEDINGûVALUE ûTHEûlRSTûTRADERûSAIDû
that did not necessarily mean everyone was
hurting.
“Trading is chaotic, active, painful, and
tonnes of fun if you’re positioned right,” he
said.
“Liquidity and pricing is terrible. I’m not
saying I’m a hero but we’re seeing other
dealers scared to price lots of enquiries. ETF
mOWSûAREûDOMINATING ûASûTHEûDIFFERENCEû
between the ETF and the underlying bonds
is at historic wides.”
Being on the right side heading into a sell-
off would naturally be another factor
helping traders to survive.
“I’d say client relationships and paranoia
WORKûFORûME vûSAIDûTHEûlRSTûTRADER
The second trader said another way of
SURVIVINGûWASûTOûlNDûAûNICHEûANDûBEûAû
“steady Eddie”, instead of exploring more
dangerous waters.
h)TSûABOUTûlNDINGûTHEûMARGINALûBUYER vû
he said. “You know it’s going lower, so even
if you sell below the bid, you know you will
get the bonds back much lower.”MIDDLE EAST
SAUDI ARABIA
SOVEREIGN TO BORROW MORE TO COVER
CORONAVIRUS RESPONSESAUDI ARABIA will tap debt markets more
THANûPREVIOUSLYûPLANNEDûTOûHELPûlNANCEû
US$32bn in economic measures to
mitigate the impact of the coronavirus
OUTBREAK ûTHEûKINGDOMSûlNANCEûMINISTERû
said on Friday.
Mohammed al-Jadaan said in a news
conference broadcast on state television
that King Salman had approved raising the
debt ceiling to 50% of GDP, from 30%, but
that borrowing this year would not exceed
SR100bn (US$26.61bn).
Saudi Arabia had planned to raise only
US$9bn in international markets this year.It sold a US$5bn triple-tranche offering in
January.AMERICAS
ARGENTINA
WORRIES OVER LOOMING LOCAL LAW
BOND PAYMENT GROWAs ARGENTINA pushes back the deadline for
the restructuring of its close to US$70bn in
foreign law debt, markets are increasingly
looking to a big US dollar payment due on a
local bond in May.
As the coronavirus-induced sell-off and
economic downturn take their toll, the
government is expected to push back the
completion of its external debt
restructuring.
While last week Argentina expressed its
intention to register debt with the SEC as
part of the restructuring, it later extended
the deadline for holders of external bonds to
disclose their identities.
Talks had originally been scheduled to
end by March 31, which would have in
THEORYûPUTû!RGENTINAûINûAûSTRONGERûlSCALû
position ahead of a US$1.3bn payment due
on May 7 on dollar-denominated, local law
8.75% Bonar 2024 notes.
And while that bond is governed by
local law, how the country now handles
the payment is seen as important, not
least because it is held by foreign
investors such as Ashmore, according to
2ElNITIVûDATAû!SHMOREûHOLDSû,EBANONû
bonds too, which are also poised to be
restructured).
Some investors are describing a potential
missed payment on the Bonar 2024 as a hard
default despite its local law status.“Maybe their inability or their decision
not to make that payment could trigger a
hard default across everything,” said a New
York-based investor in the country.
However, it is not clear whether there is a
cross-default clause on the Bonar 2024
bonds.
So far the government has largely dealt
with local law debt by rolling it over or
delaying payments such as it did in
February with peso AF20 bond linked to
the dollar.
Even so, as the economic impact of the
coronavirus worsens it remains unclear how
the country will deal with debt payments
this year.
The probability that Argentina’s
government could be headed to an even
deeper recession than previously expected
and as a result impact its debt restructuring
is high, according to a Bank of America
report.
“The Covid-19 shock will produce a
deeper recession than we anticipated in
Argentina, entailing further constraints to
economic policies, having implications for
the ongoing debt talks,” said the report.
The bank downgraded Argentina’s GDP
growth to –1.7% from –1.5%, it said.
)TûISûALSOûEXPECTINGûTHEûCOUNTRYSûlSCALû
DElCITûTOûWIDENûCLOSERûTOûnûOFû'$0 û
SIGNIlCANTLYûHIGHERûTHANûTHEûINITIALûFORECASTû
of 0.4%.
Economy Minister Martin Guzman has
already announced a package of measures
to bolster the economy, including tax
breaks, and higher investment on
infrastructure.
“It seems unlikely that they’ll be able to
implement a comprehensive external debt
restructuring in the near term for a number
of reasons,” added the New York investor.
Along with a shift in government efforts,
technical factors such as a number of parties
working from home could also impact on
debt negotiation talks.52 International Financing Review March 21 2020ALL INTL EMERGING MARKETS BONDS
BOOKRUNNERS: 1/1/2020 TO DATE
Middle East
Managing No of Total Share
bank or group issues US$(m) (%)Excluding equity-related debt.
Source: Refinitiv SDC code: L51 Standard Chartered 10 5,186.61 25.0
2 Citigroup 8 3,246.05 15.6
3 Morgan Stanley 2 1,833.06 8.8
4 HSBC 6 1,096.43 5.3
5 BofA Securities 1 982.04 4.7
6 Goldman Sachs 1 982.04 4.7
7 Credit Agricole 6 743.36 3.6
8 First Abu Dhabi 4 579.21 2.8
9 Credit Suisse 1 461.02 2.2
10 Nomura 4 384.03 1.9
Total 35 20,753.83ALL INTL EMERGING MARKETS BONDS
BOOKRUNNERS: 1/1/2020 TO DATE
Latin America
Managing No of Total Share
bank or group issues US$(m) (%)Excluding equity-related debt.
Source: Refinitiv SDC code: L31 JP Morgan 17 4,577.36 10.8
2 Deutsche Bank 6 3,900.29 9.2
3 BNP Paribas 8 3,852.17 9.1
4 Goldman Sachs 15 3,590.81 8.5
5 BofA Securities 16 3,082.47 7.3
6 BBVA 6 2,335.53 5.5
7 Scotiabank 9 2,262.22 5.4
8 Santander 9 2,054.72 4.9
9 Citigroup 7 2,038.55 4.8
10 Itau Unibanco 9 1,808.02 4.3
Total 49 42,281.558 IFR Emerging 2325 p 47 - XX.indd 52 20 / 03 / 2020 18 : 57 : 17