On Sale: This Year's Juiciest Dollar Bond, Paying Close to 10%
(Bloomberg) -- It’s been a while since emerging-market investors could get yields of close to 10 percent on new sovereign dollar bonds. Those days may soon be back.
Angola came to market on Wednesday morning offering a 30-year Eurobond with initial price talk of around 9.625 percent, along with a 10-year tranche at 8.5 percent.
The deal, which may price on Wednesday, is set to be the juiciest from a sovereign for a while. The last government to sell a dollar bond yielding more than 10 percent was Ghana back in October 2015, while Ecuador issued at 9.65 percent in December 2016. This year, the highest-yielding deal has come from Kenya, which sold a 30-year tranche at 8.25 percent in mid-February.
Angola’s Eurobonds have outperformed those of most other emerging markets in the past few months, thanks in part to reforms under new President Joao Lourenco, including a devaluation of the kwanza.
But the OPEC member’s economy was battered after oil prices sunk in 2014 and it’s still struggling with foreign-exchange shortages, rising debt and inflation of 22 percent. All that led Moody’s Investors Service to downgrade the country’s credit rating to B3, six levels below investment grade, last week.
It is also issuing just as conditions for emerging markets get tougher as the dollar strengthens and geopolitical tensions between the U.S. and nations including Russia and Iran worsen. Deutsche Bank AG, Goldman Sachs Group Inc. and Industrial & Commercial Bank of China Ltd. are managing the sale.
The good news for sovereigns in developing nations is that while the price they have to offer investors is on the rise, there’s still plenty of demand for their debt. They’ve managed to issue $83 billion of dollar bonds this year, ahead of the $63 billion sold in the same period last year and already more than half the 2017 record of $159 billion, according to data compiled by Bloomberg.
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