Kazakhstan to return to international debt markets

By bne IntelliNews January 30, 2013

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Kazakhstan is the latest to jump aboard the emerging market bond rally, announcing plans on January 29 to issue almost $1bn worth of sovereign Eurobonds in the first half of 2013. The move will mark the government's return to the international debt markets after a decade as it seeks to fund a fiscal deficit and set a benchmark for the country's corporate issuers.

Finance Minister Bolat Zhamishev told a government meeting that sovereign Eurobonds worth KZT150bn ($996m) will be issued in the first half of this year. "Taking into account low interest rates and a stable macroeconomic situation in the country, we consider it possible to launch sovereign Eurobonds in the first half of 2013 to finance the budget deficit and establish a benchmark for Kazakh issuers," Zhamishev said, according to government.kz. The cabinet voted in favour of the planned issue, which will have maturity of five years.

The liquidity from quantitative easing from the US Federal Reserve and European Central Bank is still pushing investors to hunt for yield. However, with reports that European banks in particular are reducing their balance sheets with the ECB, emerging market issuers are picking up the pace in the new year. Zhamishev said it will take Astana eight weeks to prepare the legal framework for the issue.

The planned paper will be Kazakhstan's first Eurobond for over a decade. The previous deal was in 2000, when the country issued $350m, which were redeemed in 2007. State-owned companies are expected to tap the international markets to refinance their Eurobonds later this year, Zhamishev told government officials.

Yields on domestic sovereign debt grew in the second half of 2012 as the budget deficit expanded KZT203.5bn, the government said in explanation for the return to international markets. "The indicative cost of borrowing on external capital markets was 2.01% as of January 22," the government claimed on its website. "For comparison, the current rate on five-year government securities on the internal market is 5.5%."

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