From Angola to Belarus, emerging-market governments are planning first-time debt offerings to take advantage of the biggest bond rally in at least 11 years.
Investec Asset Management Ltd., Aberdeen Asset Management and Threadneedle Asset Management Ltd. say they may buy some of the US$4 billion of debt Angola plans to sell, as well as proposed dollar bonds from Belarus. Vietnam aims to raise US$1 billion in its first offering of foreign-currency securities in four years, Deputy Prime Minister Nguyen Sinh Hung said Thursday. Iran, under three sets of United Nations Security Council sanctions, targets a 1 billion euro (US$1.5 billion) sale by December.
Developing-nation government bonds are trading near the lowest yields on record, at an average of 6.49 percent, after the biggest 12-month decline since JPMorgan Chase & Co. began tracking the data in 1998. Sales rose 70 percent to a record US$554 billion this year as central banks cut interest rates to pull the world out of the worst recession since World War II. Debuts are planned by governments without credit ratings or dependent on international bailouts.
“It's because of the wall of money that comes from extremely accommodative monetary policy globally,” said Edwin Gutierrez, an emerging-market money manager who invests US$5 billion in assets for Aberdeen in London.
Developing-nation dollar bonds have returned 26 percent so far this year, according to JPMorgan's benchmark EMBI+ Index, compared with a 23 percent gain in the Standard & Poor's 500 index. Emerging-market debt is trading at average yields 0.15 percentage point above a low in 2007 of 6.34 percent, JPMorgan indexes show.
Demand for higher yields was one reason investors placed US$28 billion of orders for Qatar's US$7 billion bond sale this week, the largest emerging-market deal to date. They received 1.85 percentage points more in interest on the five-year securities than U.S. Treasuries, compared with 3.4 percentage points when the government went to market in April.
Qatar, the world's biggest exporter of liquefied natural gas, sold securities including US$3.5 billion of five-year bonds that Thursday rose to 100.1 cents on the dollar from an issue price of 99.87 cents, according to ING Bank NV data on Bloomberg.
“There is money around looking for a home and that is what is driving the bull market,” said Peter Eerdmans, the head of emerging-market debt at Investec in London, who oversees US$950 million in assets.
Angola is seeking to sell its first international bonds to help pay for construction projects after a decline in oil proceeds, which account for about 80 percent of state revenue. The southwest African nation said Nov. 13 that it plans to begin selling the debt without a rating from Moody's Investors Service, S&P or Fitch Ratings, which bondholders use to help assess creditworthiness.
The country will need to offer higher yields than other sub-Saharan nations including Ghana, whose bonds due 2017 that were sold in 2007 yield 8.5 percent, said Aberdeen's Gutierrez.
Belarus, a country of 10 million people with an economy the size of Sudan's, has received US$3.5 billion of International Monetary Fund bailout loans this year. The country invited bids from banks to manage its debut sale of international bonds next year, Pavel Ladik, an aide to Finance Minister Andrei Kharkovets, said in a phone interview Nov. 13. The country is rated B1, four levels below investment grade, by Moody's.
