Province of Neuquen kicks off Argentina supply spree
By Paul Kilby
NEW YORK, May 5 (IFR) - A US$235m 12-year bond from the Province of Neuquen got the ball rolling on Thursday for what is expected to be a rush of new issues from Argentinian borrowers after the sovereign's success with its jumbo bond in late April.
The order book topped US$1.5bn on the relatively small trade from Neuquen allowing leads Deutsche Bank and JP Morgan to tighten pricing by 80bp before launching at 8.625%.
With an eight-year average life, Neuquen's new bond is about 162.5bp wide to the sovereign curve, where the new 2021s and 2026s have been trading around 6.40% and 7.40%, respectively.
"They have moved it in aggressively, which is not surprising as it looked very cheap versus the sovereign at IPTs of 9.5%," said a syndicate manger away from the deal, who calculated fair value on eight-year sovereign debt at 7%.
The deal comes after a decent run-up in EM debt as sentiment for the asset class turns more positive on a more stable backdrop for commodities, dovish monetary policies in the developed world and a weaker dollar.
Argentina's triumphant return last month to the bond markets with a US$16.5bn transaction that drew a line under a decade long legal battle with holdouts has also buoyed sentiment and opened the way for more borrowers to follow.
Indeed, investors may be pricing in some of the supply risks ahead as provinces such as Mendoza, Chubut as well as the City of Buenos Aires prepare deals in the coming months.
Still Neuquen stands out in the crowd. Not only is it home to one of the world's largest shale fields - Vaca Muerta, but it is one of the biggest oil producing provinces in Argentina. Continuación...