Smallest South American Nation's Only Bond Is Top Buy for Exotix

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(Bloomberg) -- South America’s smallest country has one of the world’s most attractive bonds, according to Exotix Capital.

Suriname’s $550 million of notes due in 2026 returned 19 percent last year and are set for further gains given a current account surplus and growing international reserves, according to Exotix, which named the securities one of its top-five picks. Among sovereigns maturing in eight to 10 years, the 8.2 percent yield trails only Venezuela, which has defaulted on much of its debt.

Exotix strategist Stuart Culverhouse, who specializes in analysis of the least-developed countries, said it’s getting harder to find attractive bonds given the runup in prices last year that sent emerging-market spreads to the lowest since 2014. He said that the premium for holding the riskiest debt is at a record low by his measurements.

“As a result, we admit now finding it fairly difficult to find value in EM hard currency,” Culverhouse wrote in a report. “Suriname looks cheap on our ratings.”

The South American country, rated five steps below investment grade by S&P Global Ratings, has a gross domestic product of about $3.3 billion, according to the latest International Monetary Fund data.

Exotix’s other top picks are Nigeria, Ecuador and two Brazilian companies -- Samarco Mineracao and Cia. Siderurgica Nacional SA.

©2018 Bloomberg L.P.

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