Bolivia Selling Bonds After Borrowing Costs Reach Three-Year Low
Bolivia Selling Bonds After Borrowing Costs Reach Three-Year Low
(Bloomberg) -- Bolivia is taking advantage of a rally in its bonds to tap international debt markets for the first time in four years.
The Andean nation is selling $1 billion of 11-year notes that include principal payments in 2026, 2027 and 2028, according to a person familiar with the matter who asked not to be identified because the information is private. The securities are expected to price Monday and will offer a yield premium of about 2 percentage points above Treasuries, the person said, compared with about half a point for the nation’s benchmark 2023 bonds.
Bolivia, South America’s poorest nation, saw yields on its benchmark debt plunge last week to the lowest relative to Treasuries since the notes were issued more than three years ago. The government is getting ahead of a potential increase in borrowing costs when the Federal Reserve announces its policy decision on Wednesday, joining a raft of developing nations that have sold more than $100 billion worth of euro and dollar notes this year.
"It’s mega-cheap versus the existing curve,” said Edwin Gutierrez, the head of emerging market sovereign debt in London at Aberdeen Asset Management, which oversaw $374 billion at the end of 2016.
Still, the notes are "very rich" versus regional peers such as the Dominican Republic and Costa Rica, according to Victor Fu, the director of emerging-market sovereign strategy at Stifel Nicolaus & Co., who doesn’t recommend buying the notes.
Moody’s Investors Service cut the outlook on Bolivia’s Ba3 grade, three steps below investment grade and in line with the Ivory Coast and Bangladesh, in June. The ratings company cited persistent fiscal and balance-of-payment pressures, saying the country’s fiscal deficit would remain above 6 percent of gross domestic product this year.
To contact the reporters on this story: Ben Bartenstein in Lima at bbartenstei3@bloomberg.net, Brian Smith in New York at bsmith373@bloomberg.net.
To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net, Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh, Dave Liedtka