The emerging markets (EM) bond markets are well into their summer slowdown. There were virtually no bond issues from Russia at all in July; the entire running was made up by BCS Global Markets, which issued all seven issues coming out of Russia to the tune of a cumulative $63mn, although the wider CIS market saw more action with a cumulative $1.5bn of issues with another three decent sized bonds. What action there was all occurred in Central Europe with a cumulative $6.4bn from ten issues, reports Cbonds.

Russia’s bond issues always fall off in July and are traditionally even lower in August, when next to nothing is issued. This year BCS GM issued seven bonds of an average size of just under $10mn. BCS issued a total of four bonds of between $6mn and $20mn for a total of $46mn and has been issuing bonds of this size very steadily all year to fund its business.

In the CIS the bigger bonds all came from Ukraine, where the state-owned gas company Naftogaz came to market with two issues of €600mn and $335mn with corresponding yields of 7.125% and 7.375% for bonds that mature in 2024 and 2022 respectively.

Following the landslide election victory of Ukrainian President Volodymyr Zelenskiy in April and the even more surprising victory of his Servant of the People (SOTP) party in the parliamentary elections in July, investors are optimistic about Ukraine’s future for once and the market has been ripe for bond issues. The bigger story is not the sovereign issues but the booming domestic market, which was hooked up to the Clearstream payments and settlements system in the summer. Non-resident bond investors have bought a total of $3.3bn worth of hryvnia-denominated bonds this year and now account for 12% of the total outstanding.

Ukrzaliznytsia (Ukrainian Railway) also tapped the market with a $500mn issue that matures in 2024 and pays 8.25% - the company’s second attempt to issue a bond in the last year.

Year to date the CIS market has issued a total of $19.6bn and Russia $13.5bn, which is more than the $17bn and $9.5bn these markets issued during the same seven months last year. However, July was a very slow month for both markets, accounting for only 8% of the bonds issued this year in CIS and a vanishingly small 0.5% in Russia. The biggest bond issuing month this year so far was March, which accounted for a third (34.4%) of all bonds issued in the CIS and a whopping 45% in Russia. June was also a good month in both markets (26.1% and 23.7% respectively).

The bond market in Central Europe was much more active, with several large sovereign issues. The ten issues brought the total issued over the first seven months of this year to $36.4bn – well ahead of the $26.5bn issued in the same period last year and almost as much as the $38.9bn that was issued in all of 2018.

The distribution of bond issues over the months this year in Central Europe has been much more even, with all the months of this year, apart from April and May, accounting for an even 14% to 20% of the total bond issues in the first seven months of this year.

The biggest issues were from an embattled Turkey with a $2.25bn bond that matures in 2024 and pays 6.35% and Romania with a €1.4bn bond to strong demand that matures in 2031 and pays 2.125%.

 

CEE Top issues in Jul 2019
Issue	Currency	Volume (m.)	Lead Managers
Turkey, 6.35% 10aug2024, USD	USD	2 250	BNP Paribas, Citigroup, HSBC
Romania, 2.124% 16jul2031, EUR	EUR	1 400	Citigroup, ING , Erste Group, BNP Paribas, UniCredit
EP Infrastructure, 1.698% 30jul2026, EUR	EUR	600	Citigroup, HSBC, Societe Generale, ICBC, UniCredit
OTP Bank, 2.875% 15jul2029, EUR	EUR	500	Citigroup, BNP Paribas, OTP Bank
source: Cbonds