Nigeria is planning to issue a $1 billion 15-year amortiser with a weighted average life of 14 years, according to an investor, as it undertakes a roadshow for a Eurobond that is due to finish on Wednesday.
Despite holding intensive talks with investors in London on Friday, Kevin Daly, senior investment manager at Aberdeen Asset Management, said one major concern had not been properly addressed.
"They have still yet to explain what they intend to do on the currency," said Daly. "They talked about fine tuning measures and said that the interbank market is going to function again. But they didn't explain how. This is still a big question mark."
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Nigeria's naira opened at 500 per US dollar on the black market this morning, Reuters reported, 39 percent weaker than on the official market, where the central bank has been selling the greenback to support the local currency.
"The overall story, though, is okay," Daly said. "There is better news out of oil production, which is back at 1.9m barrels a day. And there is now an amnesty programme in place for the Niger Delta, which is important as it reduces the risk of sabotage."
Daly said that the new Eurobond will form part of the 2017 budget, and that Nigeria expects to come to the market again in 2018 for a further $1.5 billion.
Although Nigeria has given no feedback on pricing levels, the sovereign could come in the mid-high 7s based on where 15-year Treasuries are, although that would be only 100bp higher than where the sovereign's July 2032s are trading.
Nigeria is eyeing issuance at a decent time for markets. Rates hikes aren't expected for a few months, EM is seeing inflows and the sovereign has the advantage of scarcity value and index inclusion.
The other sovereign on the road is Tunisia, which has already encountered its first speed bump in the form of a Fitch downgrade from BB- to B+ on Friday.
"It was sad and unexpected news, but the course of action remains the same," said a banker, who is familiar with the matter. "The markets have not really reacted to it, but we'll see what happens on the roadshow."
Tunisia's 25s, for example, are up almost 0.75pt at 95.234, and 10bp tighter at Z+431bp.
"No one [cares at all] about the rating agencies," said a trader.
One banker expects Russian corporates to join the sovereigns and GCC banks in the pipeline.
"There's a general push in Russia to get things done sooner rather than later," said the banker. "There's uncertainty around Trump and Putin, Russian clients think interest rates are only going to get higher, and people want to get money in the bag."
The banker said a CIS issuer could hit the screens later this week, while issuance from Turkey could also be back on the agenda.
"Are Turkish banks and corporates willing to come back to primary markets? We see activity in the secondary, but the volumes are not yet giving confidence for the US$500m you need for a primary issue. We're trying to make up our minds about it," he said.
"And are investors willing to participate? Of course, you dangle the carrot in front of them called yield and they will play. But then it becomes a question of how much NIP the issuer has to pay."
In the secondary, sentiment is extremely positive, according to the trader.
"It's very strong in general, interest rates are stable, EM FX is stable, everyone is feeling groovy about risk," he said. "Egypt was a massive success. We're getting a lot of demand for that, and the long end is up at 106."
The trader said a lot of demand was coming from Asian buyers, but that high-yield Europe accounts were also driving flows.
(C) IFR News
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