CEE monthly bond wrap: back to work

CEE monthly bond wrap: back to work
CIS sovereign issues drive up September bond volume
By Ben Aris in Berlin October 16, 2017

Bond issues were back after the summer hiatus with a bumper crop of issues in September totalling $5.7bn in Central and Eastern Europe (CEE) and another whopping $13bn in the Commonwealth of Independent States (CIS).

The CEE issues were above average for the year with more bonds issued only in March and May when a total of 410bn and  $8bn were issued respectively. This month's $5.7bn issued this year by 11 companies was well ahead of the $3.2bn issued in the same month a year earlier.

All the biggest issuers placed bonds for $500mn led by the Export Credit Bank of Turkey (five-year bond with a yield of 4.25%), the Turkish branch of Coca-Cola (seven-year, 4.215%), the Turkish bank Ziraat Bank (six-year, 5.125%), and the Polish mortgage bank PKO Bank Hipoteczny (seven-year, 0.75%).

However, the main action was in the CIS with the debut Tajik 10-year $500mn bond with a yield of 7.125% that was heavily oversubscribed. Yield hungry investors have been snapping up these exotic bonds banking on a general economic revival in Eastern Europe and Central Asia. Ukraine also got a huge $3bn 15-year bond away, the first by the government post-EuroMaidan demonstrations, with a coupon of 7.357%. Kyiv’s success with the issue has greatly reduced the influence the International Monetary Fund (IMF) will have on the government and its reform programme.

The majority of the other issues were Russian companies including steel mill Novolipetsk Meatllurgical Kombinat (NLMK) and petrochemical plant Sibur, as well as the Kazakh gas pipeline operator KazTransGaz that got bonds worth $500mn, $500mn and $750mn away respectively. 

Finally International Investment Bank (IIB), the Soviet-era development bank for the COMICON counties also tapped the market for €60mn with a coupon of 1.593% that reflects its status as one of the regional international financial institutions (IFI).

All in all, September was an excellent month for bond issuers, which are running well ahead of last year: in the CIS the total volume of issues is over three times more than the same month last year, driven up by the two large sovereign issues, and in Russia the bond issues were about twice those of last year.