By Timothy Ash of Standard Bank
Emerging Europe has led the way so far in 2014 in new eurobond issues, with successful issues now from Poland (€2bn 10Y), Latvia (€1bn 7Y) and then Romania ($1bn each in 10Y and 30Y). All three deals were priced to sell and have performed well since issuance, with Poland 10Y rallying 75 basis points, Latvia the star rallying by 175bp, and Romania trading relatively well so far today (15bp tighter).
Each of these credits has good individual selling points.
Africa is at the forefront of bringing financial services to the “unbanked” and new opportunities to seasoned investors. In Monday’s FT special report on Africa Banking and Finance, our correspondents examine the continent’s enormous potential and challenges, writes Justin Cash.
Africa editor Javier Blas looks at the growth of sharia-compliant investments across the continent, whilst Anousha Sakoui assesses bright new prospects for M&A activity.
Time will tell whether Franklin Templeton’s bold $5bn bet on Ukrainian sovereign debt will pay off as handsomely as the US money manager’s play on Ireland in prior years.
We may not have to wait long to find out, judging by the rate at which Ukraine’s central bank reserves and economy at large are deteriorating.
Florian von Hartig of Standard Bank
With nearly two months of the issuance calendar remaining until year end, African sovereign issuers have raised nearly double the amount of funding ($6.35bn) in the eurobond market compared to 2012.
While still representing a sliver of the total EM sovereign issuance in cross-border capital markets, African sovereigns – both seasoned and first-time issuers – are offering international fixed income investors a compelling investment case when confronted with insipid recovery and low rates offered from developed markets, lingering peripheral eurozone debt woes, and overall weariness towards undifferentiated traditional EM sovereign plays.
Few expected September to be a record month for sovereign debt auctions. Ever since the US Federal Reserve first hinted in May at a possible “tapering” of its massive bond buying programme, emerging market countries have found borrowing much tougher and more expensive. Borrowing costs soared and issuance shrunk accordingly.
But then Fed decided to keep the printing presses whirring and EM yields settled down a bit. Not surprisingly countries took the opportunity to issue debt. The result? September ended up being the best month for EM sovereign debt issuance this year.
Russia is worried about the level of foreigners owning its debt, it seems. According to Bloomberg, the head of the central bank’s financial stability department, Vladimir Chistyukhin, told reporters “We don’t consider the situation to be critical at this point… At the same time, we do see potential risks.”
Foreign investors at the start of July owned 30 per cent of outstanding debt – around 930bn rubles. That’s up from 7 per cent a year ago, and 21 per cent at the start of February. Which prompts the questions – should the bank worry? And what has sparked the increase?
To which the answers are: “No”, and “the central bank”.
We need more than that
Belarus is in a tight spot. The country has reached a peak in foreign government debt repayments and it needs $3.1bn to repay its earlier loans and sovereign eurobonds. This is a substantial amount of cash, taking into account that as of April 1, the country’s international reserve assets stood at just $8.1bn.
So what are the options?