I've got Qatar on my mind today, as the sovereign prices its new conventional bond issue. They could issue up to $5 billion in 3 tranches – a 5 year, a 10 year and a 30 year. Books closed last night, and price guidance was revised down from treasuries +low 200's for the 5 year to +190bps (+/- 10 bps) and from treasuries +low 200's bps for the 10 years to +195 bps (+ / - 10 bps). The guidance for the 30 years was always treasuries +20 bps over the 10 years, and that remains unchanged.
Books are supposed to be "heavily oversubscribed", but it is difficult to get an exact number as to how oversubscribed they are, until we get the size of the issue. Rumor has it that books are currently in excess of $27 billion. We are hearing rumblings that Qatar may issue up to $1.5 billion in each of the 5 and 10 year tranches and another $1 billion in the 30 year tranche, for a total of $4 billion – but, all speculation and nothing definitive yet. I hear that the appetite for the 5 years is robust globally, but the longer term paper is seeing better buying from International accounts.
I still expect this issue to do well, even in light of the pricing being revised down. Yesterday's guidance was looking quite rich, when compared to the existing 5 and 10 year issues that Qatar currently has outstanding – revised guidance still brings the new issue in at a discount to the existing issue. I had put out a table mid day yesterday comparing the pricing on the new bonds compared to the levels of the old bonds, highlighting the discount – please find a revised table below.
Issue | Treasury Rate | Spread over Treasuries | Yield | Discount to existent issue (bps) |
QATAR5.15 04/09/14 | 2.19% | +151 | 3.84% | |
QATAR6.55 04/09/19 | 3.34% | +184 | 5.19% | |
New Qatar 5 year | 2.19% | +190 | 4.09% | 25 |
New Qatar 10 year | 3.34% | +195 | 5.29% | 10 |
Obviously, the existing 5 and 10 year Qatari bonds have seen selling pressure in the market, as investors have been rotating out of them, to make room for the new issue, to pick up additional yield.
We can't talk about Qatar without giving a recap on the recent CBQ issue. The deal was announced on the 10th of November, and there were 5 year and 10 year tranches issued. The 5 years were priced at mid swaps +250 bps, and were yielding 5.125% at the reoffer price of $99.455. The 5 year is currently trading at the $99.80 level and is offering a yield of 5.05%. The 10 years were priced at mid swaps +400 bps, and were yielding 7.618% at the reoffer price of $99.184. The 10 year is currently trading at the$100.65 level and is offering a yield of 7.41%. So, a little positive movement from the re-offer price, and pretty much in line with my expectations. Good credit, good government support, but wasn't expecting a pop post issue.
0 comments:
Post a Comment