Ethiopia Plans Debut Dollar-Bond Joining Ghana, Kenya

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Ethiopia Plans Debut Dollar-Bond Joining Ghana, Kenya

Unread post by selam sew » 25 Nov 2014 10:13

Ethiopia plans to sell its first dollar bond as Africa’s fastest-growing economy exploits record demand for the continent’s debt.
Ethiopia picked Deutsche Bank AG and JPMorgan Chase & Co. for fixed-income investor meetings in Europe and the U.S. beginning tomorrow, according to a person familiar with the matter, who asked not to be identified as the information is private. The proceeds of the sale will be used to fund electricity, railway and sugar-industry projects, Finance Minister Sufian Ahmed said Oct. 8.
The Horn of Africa nation is joining issuers, including Ghana, Kenya, Senegal and Ivory Coast, who sold what Standard Bank Group Ltd. says is a record $15 billion of Eurobonds this year. Government and corporate issuers are seeking to benefit from investor appetite for higher returns before the Federal Reserve raises interest rates as soon as next year.

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“There is an incentive to issue before U.S. rates start to gradually edge up from next year,” Samir Gadio, head of African strategy at Standard Chartered Plc in London, said today by e-mail. “The market seems to expect that Ethiopia will price among the highest-yielding African sovereigns.”
African government and corporate Eurobonds sales this year beat 2013’s record $14 billion, Standard Bank said on Nov. 13. Sovereigns accounted for about 71 percent of issuance, according to the Johannesburg-based lender.
The yield on Kenyan dollar bonds due June 2024 was at 5.91 percent today, down from 6.88 percent when it was sold in June. Zambian dollar bonds returned almost 17 percent this year, while Ghanaian debt earned 9.5 percent, according to the Bloomberg USD Emerging Market Sovereign Bond Index. (BEMS) Ivory Coast returned 1.3 percent as neighboring countries battled an outbreak of Ebola, while Gabon earned about 11 percent.
Fed Policy
Emerging-market assets have benefited from record-low interest rates in developed nations that pushed investors to seek out higher returns elsewhere. The end of quantitative easing by the Fed and the prospect of its first interest-rate increase since 2006 is drawing some of that money back to the U.S.
Almost 30 years after pictures of Ethiopian children with distended stomachs were used to raise money by Bob Geldof and Live Aid, the country is growing faster than any other African economy, at an average of 10.9 percent over the past decade, International Monetary Fund data shows.
Ethiopia’s planned issue could be assisted by technical factors, such as scarcity, as the Eurobond will be the only tradable asset for international investors wanting access to the African nation, Standard Chartered’s Gadio said.....Read More on Bloomberg


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