CEE monthly bond wrap: dead as a Dodo

CEE monthly bond wrap: dead as a Dodo
Bond markets in eastern Europe were as dead as the proverbial Dodo in May, Russia, Ukraine, Eurobonds
By bne IntelliNews June 6, 2018

Bond markets in Eastern Europe were as dead as the proverbial Dodo in May, continuing the slowdown already seen after the US imposed new sanctions on Russia in April.

Emerging markets (EM) bonds are out of fashion at the moment due to the horrible politics in some countries, looming crisis in several countries and the start of tightening by the US Federal Reserve bank. Bloomberg reports that some $3bn has flowed out of Russian treasury bonds, the so-called OFZs, since the start of this year. OFZs were hot cakes last year.

In May, Russia issued a total of four bonds worth a total of just $54mn. We are coming into the summer slowdown but even last year there was one bond in May that was worth $500mn. All in all after a strong start to the year the total cumulative issue of bonds this year is down by about a quarter of that last year: $9.5bn vs $12.4bn as of May respectively.

No bonds were issued at all in the rest of the CIS, where the cumulative issues year-on-year are also down to $16.5bn vs $18.6bn as of May – and much of the CIS volume is driven by the Russian issues.

Still there should be some big and interesting sovereign issues later this year. Ukraine has just announced it would like to go back to the market this year with a $2.5bn issue, following the highly successful $3bn placement last year.

Uzbekistan is planning a debut $1bn issue, maybe later this year. The IFC is prepping the ground with its first ever Uzbek soum denominated “Samarkand” bond that was issued in May. And Tajikistan also wants to return to the market this year for seconds, following its $500mn issue last year.

Bond issuers in Central Europe were a little more active with a total of seven issues worth an aggregate $3bn, but that was still down on last year’s 13 issues worth a total of $8.1bn in the same month.

Amongst the CEE issuers was CPI Property Group, a real estate developer focusing on the German and Central European markets where real estate is booming. The company issued a €500mn perpetual bond with a yield of 4.375%. The government of Latvia also issued a sovereign worth €350mn that matures in 2028 and yields 1.125%