CEE monthly bond wrap: everyone’s on holiday

CEE monthly bond wrap: everyone’s on holiday
The only bonds issued in August were issued in Russia
By bne IntelliNews September 12, 2017

Everyone was on holiday in August it seems. There were no bond issues at all in Central and Eastern Europe (CEE) and only three small issues in Russia.

That makes this August even quieter than last year, when there were two bond issues worth $1.565bn in CEE, one bond in the CIS worth $1bn and no bonds at all in Russia, according to CBonds.

All the action was the three bonds issued by BCS Global Markets, a young and fast growing brokerage/investment bank focusing on Eastern Europe.

BCS issued three bonds: a $9.5mn bond that matures in 2022 with a 5.5% yield and two ruble bonds that mature in 2020 and 2027 respectively. BCS was also responsible for two of the four bonds that were issued the previous month when it raised $14.5mn.

If this year follows last year’s trend then bond issues will pick up sharply in September and if the markets follow the trends of earlier this year then the bond issuance should be higher. CEE issued $3.2bn in September 2016, the CIS issued $4.2bn and Russia issued $3.2bn.

Clearly bond investors’ appetite for more exotic offerings is high at the moment after the poorest state in Central Asia, Tajikistan, tapped into growing investor interest in sovereign debt on September 8 with a $500mn issue that yielded 7.1% and was massively oversubscribed.

That followed on from a very successful $1.4bn Belarusian issue in June with a $800mn five-year tranche with a yield of 7.125% and $600mn ten-year tranche with a yield of 7.625%.

Since then the newly issued Eurobonds have traded up substantially, while the economic situation on the ground is also improving gradually, reports Raiffeisen Bank (RZB).

“The benchmark spread on the 5-year international USD bonds offered back in June tightened by some 100bp since then (from 467bp to some 350bp, yields down from around 6.4% to 5.2%), the spread compression on the long-dated bonds amounts to some 100bp as well (down from some 500bp to below 400bp, yields down from well above 7% to close to 6%),” RZB analyst Gunter Deuber said in a note.

Ukraine is next up with its first post-Maidan Eurobond issue slated for this autumn. According to the government the issue will be used to refinance some of the debt that was restructured and push the maturity dates out as Ukraine’s repayment of the restructured bonds was due to start next year.

The Ukrainian Ministry of Finance clearly wants to make use of the current demand for high yielding bonds to spread the load and push the redemptions further down the road to give the economy more time to recover.

The other big bond event on the horizon is a possible $4bn Eurobond swap by the Russian government with much the same goals as Ukraine. However, the government has been flip flopping on the issue and currently the chances of a deal being offered have fallen.

 

Top issues in August 2017

 

 

 

Issue

Currency

Volume (m.)

Lead Managers

BCS

USD

9,5

BCS, 5.5% 31oct2022, USD

BCS

RUB

700

BCS, 9% 16aug2020, RUB

BCS

RUB

1000

BCS, FRN 23aug2027, RUB

 

 

 

Data

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